Bull Of The Day: Ralph Lauren

Ralph Lauren (RL) is a Zacks Rank #1 (Strong Buy) that is a major designer, marketer, and distributor of premium lifestyle products. The company offers apparel, including a range of men's, women's, and children's clothing

The stock has rallied after an impressive earnings beat and a positive outlook.

After struggling for more than a decade, the stock is close to all-time highs. The question for investors is if they should get in now or wait for a better entry point.

About the Company

Ralph Lauren was founded in 1967 and is headquartered in New York, NY. The company has about 15,000 full-time employees and has a market cap of $12 billion.

The company possesses a strong portfolio of globally recognized brand names such as Polo Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren Collection, Double RL, Lauren Ralph Lauren, Polo Golf Ralph Lauren, Ralph Lauren Golf, RLX Ralph Lauren, Polo Ralph Lauren Children, Chaps, Club Monaco and American Living.

The stock has a Zacks Style Score of “A” in Growth and “A” in Momentum. It sports a Style Score of “C in Value, with a Forward PE of 17.  The company also pays a small dividend of 1.6%.


Q3 Earnings Beat

Earlier In February, Ralph Lauren reported Q3 EPS at $4.17 v $3.53 expected, or an 18% surprise to the upside. Revenues came in at $1.93B v the $1.86B expected.

The company affirmed FY24 guidance but raised gross margins to +140-180bps v the +120-170bps prior. Management credited margin improvement to reduced freight costs, favorable channel and geographic mix, and continued growth in AUR more than offsetting product cost inflation.


Analyst Estimates

Since earnings, analysts have been aggressively hiking their numbers. Over the last 30 days earnings estimates for RL have been going higher for all time frames.

For the current quarter, analysts have lifted estimates from $1.50 to $1.62, or 8%.  

Looking at the current year, estimates have gone from $9.43 to $10.11 or 7%

Analysts expect the momentum next year to continue. Over the last 30 days, estimates have been hiked by 6%.

Price targets are also going higher with UBS recently lifting its price target from $190 to $240.


The Technicals

The stock is up 25% since reporting EPS, so investors might hesitate to chase RL higher.

If the stock pulls back, watch the 21-day MA, which is currently at $155. The 200-day MA is at $125 and the 50-day is $147.

Looking at the chart back to 2013, the stock was seeing resistance at $150, which is the 61.8% Fibonacci retracement drawn from 2013 highs to COVID lows. Since that level has broken, investors can target the 161.8% extension, which is $275. This would imply a move of 50% higher.


Bottom Line

Retail seems to be back and with Ralph Lauren finding success in managing costs, the company is more profitable. This is great news for investors and the technical break of the $150 level signals the bull run has just begun.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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