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Ralph Lauren's Stock Set to Outperform Amid Earnings Beats, UBS Says

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Ralph Lauren's Stock Set to Outperform Amid Earnings Beats, UBS Says

Ralph Lauren's (RL) stock should outperform expectations over the next 12 months as future earnings beats validate the luxury apparel maker's transformation, UBS Securities said in a note emailed Friday.

The company reported better-than-expected fiscal first-quarter results Thursday, driven by revenue growth in Asia and North America. The company upgraded its full-year revenue guidance, expecting it to rise around 5% to 6% on a constant currency basis.

"Strengthening brand desirability across lifestyle categories, channels, and regions is translating into healthy, consistent, sustainable growth," Chief Executive Patrice Louvet said during an earnings conference call, according to a FactSet transcript.

The market doesn't appreciate the "transformational changes" Ralph Lauren has made to its brand image, distribution model and cost structure over the past five years, UBS analysts Jay Sole and Mauricio Serna said.

Positive earnings-per-share surprises should drive stock price outperformance over the next 12 months, Sole and Serna wrote.

"We think the stock looks inexpensive and see a favorable upside/downside skew," the duo said.

The brokerage raised its price target on Ralph Lauren's stock to $520 from $511 and reiterated its buy rating. The company's stock was up 0.1% in late Friday afternoon trade and has gained 12% so far this year.

"(Ralph Lauren's) revenues and profits are expanding so fast, the company is able to beat Street expectations while also increasing investments in initiatives to fuel future growth," UBS added.

The company has vowed to continue investing in its brand and products to create long-term value.

"We are staying on offense and remain committed to investing in our brand, our products, our experiences, and our capabilities to better serve and create lasting connections with our customers, while driving durable growth and long-term value creation," Chief Financial Officer Justin Picicci told analysts on the earnings conference call.

Price: $395.91, Change: $+0.07, Percent Change: +0.02%

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