On Wednesday, Goldman Sachs adjusted its price target for LVMH Moet Hennessy Louis Vuitton SE (MC:FP) (OTC: OTC:LVMUY), the luxury goods conglomerate, reducing it to EUR770.00 from the previous EUR815.00. The firm sustained its Buy rating on the stock despite the adjustment.
The revision followed LVMH's third-quarter sales report, which showed a 3% decline in constant foreign exchange (cFX) growth, trailing market expectations.
The company's organic sales also experienced a 3% year-over-year drop in cFX during the third quarter, falling short of the Visible Alpha Consensus Data, which had anticipated a 1% increase, and Goldman Sachs' own expectation of a flat performance. The Fashion and Leather division, which is LVMH's largest, reported a 5% decrease in cFX, underperforming against the expected 1% growth and Goldman Sachs' forecast of no change.
LVMH's Wines & Spirits division did not fare well either, posting a 7% slump in cFX, which was more pronounced than the consensus estimate of a 2% decline and Goldman Sachs' estimate of a 5% reduction. This downturn was attributed to weak demand even though the Hennessy brand saw growth in the United States as inventory levels among wholesale partners began to normalize.
The Watches and Jewellery division of LVMH also reported a disappointing performance with a 4% decline in cFX growth. This figure was slightly worse than the consensus estimate of a 3% decrease but was consistent with the division's performance in the previous quarter. The analyst noted that the price mix remained relatively stable, and the overall underperformance was mainly due to negative volumes.
In other recent news, LVMH Moet Hennessy Louis Vuitton SE experienced mixed financial results amid a challenging global market. The luxury goods company reported a modest increase in revenues for the first half of 2024, with organic growth of 2%, reaching €41.7 billion.
However, the company saw an 8% decline in profit from recurring operations compared to the previous year, totaling €10.7 billion. RBC Capital maintained its Outperform rating on LVMH, despite the company's third-quarter revenue falling short of market expectations.
Similarly, Citi, JPMorgan, and Morgan Stanley have all reduced their price targets for LVMH, citing concerns of weakening demand in Asia and Europe across most divisions. These recent developments underscore the challenges and adjustments LVMH is making in response to shifting market dynamics.
InvestingPro Insights
Despite the recent challenges highlighted in LVMH's third-quarter sales report, InvestingPro data reveals some compelling aspects of the company's financial health. LVMH boasts an impressive gross profit margin of 68.53% for the last twelve months as of Q2 2024, underscoring its ability to maintain profitability even in a challenging market environment. This aligns with one of the InvestingPro Tips, which notes LVMH's "impressive gross profit margins."
Additionally, LVMH's dividend performance stands out. The company has raised its dividend for 4 consecutive years and has maintained dividend payments for 27 consecutive years, according to InvestingPro Tips. This commitment to shareholder returns is further emphasized by a current dividend yield of 2.04% and a robust dividend growth of 25.08% over the last twelve months.
While the recent sales report has led to a price target reduction, it's worth noting that LVMH is currently trading near its 52-week low, potentially presenting a value opportunity for long-term investors. The company's P/E ratio of 22.35 suggests that the market still has confidence in LVMH's earnings potential despite recent headwinds.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on LVMH, providing deeper insights into the company's financial health and market position.
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