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Buy the Dip in These 2 Oversold Apparel Manufacturing Stocks

The apparel manufacturing industry took a hit during the worst of the COVID-19 pandemic. However, with rising consumer spending, the industry rebounded last year. And because the demand for apparel is expected to remain strong this year, we think it could be wise to buy the price dip in quality apparel manufacturing stocks Under Armour (UAA) and PVH (PVH). Let’s discuss.

Apparel sales accelerated last year due to increased consumer spending. Reopening stores, introducing new fashion trends, adapting to customer preferences, and expanding their digital presence helped apparel manufacturers recover ground from their washout in 2020.

As the economy continues its recovery, the demand for apparel is expected to pick up due to higher employment levels and strong consumer spending. Consumers are expected to unleash their buying power as they return to their pre-pandemic lifestyles. Traveling, the resumption of outdoor activities, and the return to offices to work are expected to bolster apparel sales. The global apparel market’s revenue is expected to grow at an 11.5% CAGR to $785.65 billion by 2025.

Given this backdrop, we think it could be wise to scoop up quality apparel manufacturing stocks Under Armour, Inc. (UAA) and PVH Corp. (PVH). They are currently trading much below their 52-week highs but have significant upside potential.

Under Armour, Inc. (UAA)

UAA in Baltimore, Md., develops, markets, and distributes branded performance apparel, footwear and accessories for men, women, and youth. The company offers its apparel in compression, fitted, and loose cuts for the hot and cold. Its brand portfolio includes HEATGEAR, COLDGEAR, and ARMOUR FLEECE.

On Nov. 10, 2021, UAA announced that it had selected Amazon Web Services, Inc. as its cloud provider for SAP. This partnership will likely enable UAA to enhance security, increase resilience and provide valuable insights across its business.

UAA’s net revenues for its fiscal year 2021 increased 27% year-over-year to $5.68 billion. The company’s adjusted net income came in at $396.90 million, compared to an adjusted net loss of $120.17 million in the year-ago period. Also, its adjusted EPS came in at $0.85, compared to an adjusted loss per share of $0.26 in the year-ago period.

Analysts expect UAA’s EPS for its fiscal year 2023 to increase 8% year-over-year to $0.81. Its revenue for the quarter ending March 31, 2022, is expected to increase 5.2% year-over-year to $1.32 billion. Also, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has declined 33.4% in price to close the last trading session at $16.12. It is currently trading 40.9% below its 52-week high of $27.28, which it hit on Nov. 19, 2021

UAA’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. It has an A grade for Quality.

It is ranked #8  of 36 stocks in the Athletics & Recreation industry. Click here to see the other ratings of UAA for Growth, Value, Momentum, Stability, and Sentiment.

PVH Corp. (PVH)

PVH in New York City is an apparel company. Its portfolio consists of brands that include Calvin Klein, Tommy Hilfiger, Van Heusen, IZOD, ARROW, Warner’s, Olga, True&Co., and Geoffrey Beene. The company also designs and markets dress shirts, neckwear, sportswear, jeans wear, underwear, swimwear, and other products.

On August 2, 2021, PVH announced the completion of its sale of certain intellectual property and other assets of its Heritage Brands business to Authentic Brands Group (ABG). The transaction included the IZOD, Van Heusen, ARROW, and Geoffrey Beene trademarks and certain related inventories, and other assets. CEO of PVH Corp., Stefan Larsson, said, “PVH is entering a new growth chapter, executing against our accelerated recovery priorities and with a clear focus on unlocking the full potential of our iconic, global growth brands, Calvin Klein and Tommy Hilfiger.”

PVH’s total revenue increased 10.1% year-over-year to $2.33 billion for the third quarter, ended Oct. 31, 2021. The company’s non-GAAP net income increased 103.9% year-over-year to $192.10 million. Also, its non-GAAP EPS came in at $2.67, representing an increase of 102.2% year-over-year.

For the quarter ending Jan. 31, 2022, PVH’s EPS is expected to increase 626.3% year-over-year to $2. Its revenue for its fiscal year 2022 is expected to increase 27.6% year-over-year to $9.10 billion. It surpassed consensus EPS estimates in three of the trailing four quarters. Over the past six months, the stock has declined  31.7% to close its last trading session at $75.03. It is currently trading 40.1% below its 52-week high of $125.42, which it hit on Nov. 5, 2021.

PVH’s POWR Ratings reflect solid prospects. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.

It has a B grade for Growth, Value, Sentiment, and Quality. Within the A-rated Fashion & Luxury industry, it is ranked #5  of 66 stocks. To see the other ratings of PVH for Momentum and Stability, click here.

UAA shares were trading at $16.61 per share on Wednesday morning, up $0.49 (+3.04%). Year-to-date, UAA has declined -21.61%, versus a -9.16% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.


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