RBC Capital maintained its Outperform rating on LVMH Moet Hennessy Louis Vuitton SE (MC:FP) (OTC: OTC:LVMUY) with a steady price target of EUR760.00. The firm's analysis followed LVMH's third-quarter revenue report, which fell short of market expectations. The luxury goods conglomerate disclosed a revenue of €19.08 billion for the third quarter of 2024, a figure that did not meet consensus forecasts by 5%.
The company experienced a 3% decline in organic revenue growth during the quarter, contrary to the 1% growth anticipated by consensus. Each of LVMH's divisions did not meet consensus expectations. The Fashion & Leather Goods sector, a significant component of LVMH's portfolio, reported revenues of €9.15 billion, which was 6% below consensus and represented a 5% organic revenue decline.
The Wines & Spirits division also reported lower-than-expected revenues, amounting to €1.39 billion, which was 5% below the market consensus. This division saw a 7% organic revenue decline, compared to a forecasted 2% decrease. The Watches & Jewellery segment's revenue stood at €2.39 billion, 2% below consensus, with a 4% drop in organic revenue.
However, some divisions did report positive growth despite not meeting consensus predictions. The Selective Retailing and Perfumes & Cosmetics divisions saw organic revenue growth of 2% and 3%, respectively, though these figures were below the 5% growth expected by consensus.
RBC Capital's analysis suggests that these results might be perceived negatively by the market, indicating a more significant slowdown than previously anticipated. The overall performance in the third quarter suggests that the luxury goods market may be facing challenges, as evidenced by LVMH's reported figures.
LVMH Moet Hennessy Louis Vuitton SE has been a subject of several financial revisions. Leading financial institutions, including Citi, JPMorgan, and Morgan Stanley, have reduced their price targets for the luxury goods company. The revisions come amid concerns of weakening demand in Asia, particularly China, and Europe across most divisions.
Citi has adjusted its sales estimates for LVMH for fiscal years 2024 and 2025 due to reduced constant foreign exchange growth assumptions, primarily affecting the Wines & Spirits and Fashion & Leather goods divisions. The firm also anticipates pressure on earnings due to foreign exchange headwinds and a temporary corporate tax increase in France.
JPMorgan and Morgan Stanley have also adjusted their growth forecasts for LVMH. JPMorgan has reduced its forecast for the company's Fashion & Leather Goods growth and overall sales growth, while Morgan Stanley has revised its revenue and EBIT estimates downward.
Despite these adjustments, LVMH 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.
InvestingPro Insights
Despite the recent underwhelming quarterly results, LVMH Moet Hennessy Louis Vuitton SE (OTC: LVMUY) maintains a strong financial position with several positive indicators. According to InvestingPro data, the company boasts a market capitalization of $340.07 billion and an impressive gross profit margin of 68.53% for the last twelve months as of Q2 2024. This aligns with one of the InvestingPro Tips, which highlights LVMUY's "impressive gross profit margins."
Additionally, LVMH has demonstrated a commitment to shareholder returns. An InvestingPro Tip notes that the company "has raised its dividend for 4 consecutive years" and "has maintained dividend payments for 27 consecutive years." This is further supported by the current dividend yield of 1.88% and a robust dividend growth of 25.08% over the last twelve months.
While the recent quarterly report showed some challenges, it's worth noting that LVMH is currently trading near its 52-week low, potentially presenting a value opportunity for investors. The company's P/E ratio of 22.35 suggests that despite recent headwinds, the market still maintains confidence in LVMH's long-term prospects.
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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