LVMH: It's All About The Comps, Stay Patient Until Q3-24 (Rating Upgrade)

seekingalpha05-20

LVMH experienced its first year-over-year revenue decline since Covid, with currency headwinds offsetting organic growth in Q1-24.The company's revenue slowdown in Q1-24 raises questions about whether...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2436511760?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1366223190/image_1366223190.jpg","is_english":true,"pubTime":"2024-05-20 10:16","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2436511760","market":"hk","top_or_hot":-1,"title":"LVMH: It's All About The Comps, Stay Patient Until Q3-24 (Rating Upgrade)","media":"seekingalpha","content":"<div>\n<p>LVMH experienced its first year-over-year revenue decline since Covid, with currency headwinds offsetting organic growth in Q1-24.The company's revenue slowdown in Q1-24 raises questions about whether...</p>\n\n<a href=\"https://seekingalpha.com/article/4694426-lvmh-it-is-all-about-the-comps-stay-patient-until-q3-24-rating-upgrade\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>LVMH: It's All About The Comps, Stay Patient Until Q3-24 (Rating Upgrade)</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nLVMH: It's All About The Comps, Stay Patient Until Q3-24 (Rating Upgrade)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-20 10:16 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694426-lvmh-it-is-all-about-the-comps-stay-patient-until-q3-24-rating-upgrade><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>LVMH experienced its first year-over-year revenue decline since Covid, with currency headwinds offsetting organic growth in Q1-24.The company's revenue slowdown in Q1-24 raises questions about whether...</p>\n\n<a href=\"https://seekingalpha.com/article/4694426-lvmh-it-is-all-about-the-comps-stay-patient-until-q3-24-rating-upgrade\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4694426-lvmh-it-is-all-about-the-comps-stay-patient-until-q3-24-rating-upgrade","article_id":"2436511760","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1366223190/image_1366223190.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2436511760","pubTimestamp":1716171386,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"LVMH experienced its first year-over-year revenue decline since Covid, with currency headwinds offsetting organic growth in Q1-24.The company's revenue slowdown in Q1-24 raises questions about whether","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","CFRHF":"Compagnie Financiere Richemont AG","BK4588":"碎股","LVMUY":"路易威登","LVMHF":"LVMH-Moet Hennessy Louis Vuitton","BK4202":"服装、服饰与奢侈品","PPRUF":"Kering SA"},"translate_title":"路威酩轩集团：一切都是为了补偿，耐心等待第三季度至第二十四季度（评级升级）","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CFRHF":1,"LVMHF":1,"LVMUY":1,"PPRUF":1},"content_text":"LVMH experienced its first year-over-year revenue decline since Covid, with currency headwinds offsetting organic growth in Q1-24.The company's revenue slowdown in Q1-24 raises questions about whether it is a long-term issue or just a matter of normalization.The answer to this question will be revealed in Q3-24.   ojos de hojalataLVMH (OTCPK:LVMHF) (OTCPK:LVMUY), one of the best-run conglomerates in the luxury sector, experienced its first year-over-year revenue decline since Covid, as currency headwinds more than offset the company's 3% organic growth in Q1-24. The big unknown surrounding LVMH right now is whether the revenue slowdown is just a matter of normalization or more of a long-term issue. This will be answered in Q3-24. Let's see why. Introduction & The Luxury Sector Backdrop I've been covering LVMH on Seeking Alpha since early 2023, and it's been quite a roller coaster ride. LVMH and its peers had a crazy run post-COVID, driven by a perfect mix of inflated demand fueled by pandemic savings and stimulus, exceptional designs and marketing, and successful cost-cutting initiatives that took place in 2020. This has resulted in historically high revenue growth, as LVMH grew revenues at a 24.5% CAGR between 2020-2023, and reached historically high margins, surpassing 17.5% profit margins in 2023, which translates into an astounding 47% net income CAGR. The stock has responded, more than doubling between January 2020 and April 2023: Data by YChartsAt some point, this run had to come to an end. Starting in Q3-23, reported sales growth catered to low-single-digits, due to a much tougher economic environment, currency headwinds, built-up inventories, and most importantly, very tough comps. Data by YChartsToday, the stock is down more than 13% from its April 2023 highs, after several quarters of lackluster growth. Will it continue, or is there a big recovery in sight? Let's find out. First-Quarter Highlights LVMH had a decent start to 2024. Despite having its worst quarter since 2020 with an underwhelming 3% organic growth at the group level, it was in line with expectations, and better than peers like Kering (OTCPK:PPRUF) which had a 10% decline, and Richemont (OTCPK:CFRHF) which grew by 2%.   LVMH Q1'24 PresentationGeographically, LVMH had positive growth in Europe, United States, and Japan, while revenues in Asia declined, primarily due to China.   LVMH Q1'24 PresentationOn a segment basis, Wines & Spirits was the worst performer, as inventory depletions remain slow. Importantly, management said on the call they are optimistic for Q2, as business in the U.S. is stabilizing. It's also worth noting that Q2 will lap the first negative growth quarter for the segment, so comps are much easier. Watches & Jewelry had a tough quarter as well, declining by 2% organically, while Richemont grew by 2% and at a larger scale. However, if Selective Retailing shined, led by market share gains in Sephora, while F&LG and P&C had positive growth as well. It's All About Comps, Which Means It's All About Q3-24 LVMH's normalized growth rate is somewhere in the 8%-11% range historically. This is driven by price increases, acquisitions, and volume. In order to normalize for the outsized growth years post-COVID, I look at the growth stack on a 2019 baseline:   Created and calculated by the author based on data from LVMH financial reports.As we can see, LVMH remained at the high end of its historical growth range in Q1, which reflected a 10.5% CAGR from Q1-19. Based on my estimates, as well as consensus, this should remain the case for the remainder of the year. With that said, what investors see is 3% organic growth Y/Y and a 1.6% decline in reported sales. It's hard to disregard these numbers, especially in an uncertain space like luxury retail. Let's not forget, however, that this is a game of comps.   Created and calculated by the author based on data from LVMH financial reports.Looking at the above table, there are several factors we can observe as positive in the near term. This year's second quarter will lap negative growth in the U.S., which is an important country, especially with the stronger dollar. It's also the first negative comp for Wines & Spirits. On the flip side, Q2-23 was a very strong quarter in all other aspects, so I expect only a slight acceleration. The third quarter is where things get really interesting. As we can see, it's a much easier comp compared to Q1 in all geographies, as well as all segments besides Selective Retailing. In addition, it was the quarter with the strongest currency headwinds, with almost an 8% impact.   Created and calculated by the author based on data from LVMH financial reports.If we take a wider look, we can see that there's a 5% decline from Q1 to Q2, but a much sharper 9% decline from Q2 to Q3, and an even sharper drop of 10% from Q3 to Q4. All this goes to show that if we are in a normalization process, rather than a deeper fundamental flaw, then starting in Q3, we should see LVMH return to high-single-digit growth on a year-over-year basis. As we shall see below, the market seems to believe this is what's going to happen. Valuation LVMH has a very long track record of successful acquisitions, above-market and above-sector organic growth, and consistent margin expansion. We can argue about the right multiple for such a company, or rely on facts. Between 2014-2017, LVMH traded in the 16x-20x range. In 2017, the market rerated overall, luxury experienced an even bigger rerate, and LVMH itself showed another year of double-digit growth and solid margin expansion. This sent the stock into a new range, and it traded between 20x-28x. Data by YChartsFollowing the pandemic, the company returned to the 2017-2020 range, as it traded around 25x on average. Data by YChartsToday, based on a share price of €783.2 and consensus estimates for EPS of €32.0, LVMH is trading at 24.5x 2024 earnings, which is slightly below the steady-state average. Considering 25x as a fair multiple, the near-term upside algorithm in the near term is 2% from multiple expansion, and additional upside if the company beats estimates. I view the 2024 estimates as quite reasonable, as they reflect 17.7% margins, which is in line with the last two years. On revenues, they reflect a minor acceleration to 1.6% in the second quarter and a sharp acceleration in Q3 to 11%, which fits into the framework we discussed in the previous section. Looking further ahead, consensus estimates reflect 7.3% revenue growth in 2025, and a 50 bps improvement in margins, resulting in a 2025 multiple of 22x. If our thesis on normalization is correct, I believe 7.3% is a bit low but reasonable. As we all know, valuations are forward-looking. Because I have a high degree of confidence in LVMH's recovery in H2-23, and believe it can more than achieve its 2025 estimates, I have a price target of €880 by the end of 2024, based on a 25x multiple on 2025 EPS, reflecting almost 13% upside. For the LVMHF ADR, this reflects a price target of $965. Conclusion Following two and a half extraordinary years coming out of the pandemic, LVMH was due for a slowdown, and investors legitimately have turned somewhat negative. Looking ahead, I expect a slight uptick in the second quarter and a sharp acceleration in Q3. If this forecast becomes a reality, I estimate the stock will start reflecting 2025 prospects, which means a significant 13% upside. Considering all of the above, I believe a Buy rating is due, as I have a strong conviction in LVMH's ability to meet expectations. If I'm wrong, this will show that LVMH has a deeper problem than what I initially thought, and I might downgrade the stock to a Sell.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2436511760"}