On Thursday, UBS revised its price target for shares of LVMH (EPA:LVMH) Moet Hennessy Louis Vuitton SE (MC:FP) (OTC: OTC:LVMUY), reducing it from EUR844.00 to EUR800.00, while maintaining a Neutral rating on the stock. The adjustment comes ahead of the luxury goods company's earnings report, expected in the second half of July, where the focus will be on its margin resilience amidst market trends.
The firm noted that the luxury sector is currently exhibiting sluggish trends, with particular concerns about the leather goods category's momentum and the competitive landscape in the cognac market. These factors have led to a forecasted earnings per share (EPS) decrease of 2% for the fiscal years 2024 through 2026, anticipating increased margin pressure within LVMH's Fashion & Leather Goods (F&LG) and Wines & Spirits (W&S) divisions.
UBS's estimates for the first half of the year remain largely unchanged, with only a slight adjustment to the F&LG operating sales growth (OSG), now expected at +2% instead of the previously forecasted +2.5%. For the second half of the year, the group's OSG is projected to be more moderate at +6%, with F&LG and W&S expected to grow at +6% and +7%, respectively.
In other recent news, LVMH, the luxury conglomerate, has acquired Swiss specialty clock manufacturer L'Epee 1839. The acquisition is seen as a move to bolster LVMH's standing in the high-end watchmaking sector, with Frederic Arnault, leader of LVMH's watches division, expressing enthusiasm for L'Epee 1839's exceptional skill in creating mechanical art objects. This development follows LVMH's recent expansion into experiential luxury offerings with the acquisition of French bistro Chez l'Ami Louis.
In terms of financial performance, LVMH's first-quarter sales report revealed figures that closely aligned with market projections, resulting in UBS maintaining a neutral rating on the company's stock. Despite a 2% decrease compared to consensus, the sales totaled €20,694 million, marking a 1% increase from UBS's estimates. The company's largest segment, Fashion & Leather Goods, matched expectations with a 2% organic sales growth.
Analysts from Goldman Sachs (NYSE:GS), however, maintain a buy rating for LVMH, projecting a positive trajectory for the company's sales growth. They anticipate a 3.0% increase in underlying sales for the first quarter, closely aligned with a consensus estimate of 3.3%. Goldman Sachs also underscores LVMH's robust position to capture additional market share, bolstered by strong brand momentum and an appealing mix of customer cohorts.
InvestingPro Insights
Amid the cautious outlook from UBS on LVMH Moet Hennessy Louis Vuitton SE, InvestingPro data and tips provide a broader perspective on the company's financial health and market performance. With a robust market capitalization of $382.58 billion and impressive gross profit margins of 68.8% over the last twelve months as of Q1 2023, LVMH showcases its strength in the luxury goods sector. These figures align with the company's reputation for maintaining high-quality products and profitability, as reflected by its consistent dividend payments over 27 consecutive years and a recent dividend growth of 28.88%.
An InvestingPro Tip highlights that LVMH has raised its dividend for three consecutive years, underlining its commitment to shareholder returns. Additionally, the company is lauded for its low price volatility, which could be an attractive trait for investors seeking stability in a fluctuating market. Despite trading at a high P/E ratio relative to near-term earnings growth, indicating a premium valuation, LVMH's status as a prominent player in the Textiles, Apparel & Luxury Goods industry and its capacity to cover interest payments with cash flows are factors that may justify the current valuation to some investors.
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