Cowen Turns Bullish On Calvin Klein, Tommy Hilfiger Parent Company G-III Apparel

G-III Apparel Group, Ltd. GIII, the apparel company behind brands such as Calvin Klein, DKNY and Levi's, boasts "substantial earnings power" from its core business that investors should watch, according to Cowen.

The Analyst

Cowen's John Kernan upgraded G-III Apparel Group's stock rating from Market Perform to Outperform with a price target lifted from $34 to $49.

The Thesis

G-III's Calvin Klein and Tommy Hilfiger license business continues to outperform and totaled nearly $1.3 billion in fiscal 2018, which marks an increase of 23 percent from a year ago, Kernan said in the upgrade note. (See the analyst's track record here.)

G-III's long-term targets of $1.5 billion in CK and $1 billion in Tommy Hilfiger implies upside to consensus estimates into fiscal 2021 and can be attributed to strong demand from the key 18-24-year-old demographic group, the analyst said. 

G-III boasts four key levers which should help the company grow its EPS from an expected $2.13 in fiscal 2019 to $3.32 in fiscal 2021, at least $3.70 in fiscal 2022 and $5 in the long run, Kernan said:

• Momentum and profitability in the Donna Karan brand, which is now available in 400 Macy's.
• Improvements in the overall retail segment.
• Core wholesale growth.
• Interest expense as key drivers.

The Street's fiscal 2020 consensus estimate of $2.48 for G-III looks "too conservative," which makes the stock attractive at current levels, Kernan said. 

Price Action

Shares of G-II Apparel Group were up 5.43 percent at the time of publication Wednesday. 

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