RL: Don’t Buy Ralph Lauren’s Earnings Surprise

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Fashion giant Ralph Lauren (RL) just reported surprising results for the second quarter. So, is now a good time to buy RL?

Ralph Lauren Profile

ralph_lauren_185Ralph Lauren was launched in 1967 by… you guessed it, American designer Ralph Lauren. Based in New York, Ralph Lauren Corp. is known for producing a number of fashion brands, including Polo, American Living, Chaps and Club Monaco.

Ralph Lauren employs 14,000 full-time employees, and in the most recent year, it brought in $7.45 billion in sales.

Ralph Lauren Earnings Rundown

Yesterday, Ralph Lauren reported better-than-expected earnings-per-share in its second quarter. EPS increased to $2.06, which beat analysts’ estimates of $2.04. Ralph Lauren’s net revenue for the quarter increased to $1.99 billion, up 4% and just missing analysts’ estimates of $2.02 billion. Retail sales jumped 7% to $1 billion. Ralph Lauren’s Q2 net income dipped 2% to $201 million from the previous year. Net operating expenses rose to $846 million, up from $789 million last year.

Looking ahead, Ralph Lauren forecasts a 5% to 7% revenue growth, down from its previous estimate of 6% to 8%.

Current Ratings

Over the past year, Ralph Lauren has maintained a “sell” rating, and it doesn’t seem to be breaking away from this trend. RL stock continues to suffer from poor buying pressure and receives a “D” for its Quantitative Grade. Ralph Lauren stock’s fundamental metrics are only slightly better, with return on equity (A) and cash flow (B) being highlights.

Ralph Lauren could improve in the following areas: operating margin growth, earnings momentum, earnings surprises and analysts earning revisions, which all receive “C” grades. Sales growth and earnings are also areas that need some work, both earning “Ds.” Ralph Lauren receives a “C” for its Fundamental Grade.

As of this posting, Oct. 30, I consider RL a “D-rated sell.”

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


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