Investing.com -- RBC Capital Markets in a note dated Friday raised its price target for LVMH (EPA:LVMH) Moët Hennessy Louis Vuitton to €780 from €700 following the Luxury goods company’s fourth-quarter and full-year 2024 results.
The brokerage cited slightly stronger-than-expected revenue growth, particularly in the Fashion & Leather Goods and Watches & Jewellery divisions, as the key driver behind the revised outlook.
LVMH reported full-year revenues of €84.7 billion, reflecting a modest 1% organic growth, in line with analyst expectations.
However, earnings before interest and taxes came in at €19.6 billion, 4% below consensus, weighed down by one-time cost pressures, including currency headwinds, Champagne grape accounting adjustments, and higher general administrative expenses tied to the Olympics and an employee share program.
The group’s EBIT margin for the year stood at 23.1%, a slight decline compared to previous expectations.
Fourth-quarter organic revenue growth of 1% was a slight improvement over market forecasts, which had projected a 1% decline.
The Fashion & Leather Goods segment saw a 1% drop, better than the anticipated 3% decline, while Watches & Jewellery posted a 3% gain, outperforming consensus expectations of a 3% drop.
Selective Retailing also exceeded expectations, rising 7% compared to a forecasted 3% gain.
Despite this, profitability remained under pressure, with Wines & Spirits, Watches & Jewellery, and Perfumes & Cosmetics posting weaker-than-expected margins, while Fashion & Leather Goods margins were 100 basis points lower than expected at 35.3%.
Looking ahead, RBC Capital Markets adjusted its estimates for fiscal 2025, raising revenue projections by 1% while lowering EBIT and earnings per share forecasts by 2%.
The revised outlook now sees organic revenue growth of 4.4% for the year, up from a prior estimate of 3.3%, driven primarily by a stronger outlook for Fashion & Leather Goods and Watches & Jewellery.
EBIT margins are expected to be slightly lower at 23.3%, reflecting the weaker base in fiscal 2024 and ongoing pressure on Wines & Spirits profitability.
The bank maintained its forecasts for fiscal 2026, projecting a 5.7% organic revenue increase and an EBIT of €22.75 billion, representing a margin expansion of 40 basis points year-over-year.
RBC’s estimates for 2025 revenue are slightly ahead of market consensus, though EBIT projections remain about 1% lower.
For 2026 and 2027, RBC’s EBIT forecasts trail consensus by 2-4%, reflecting more conservative margin assumptions.
Despite the near-term margin headwinds, LVMH’s stock remains one of RBC’s top picks in the luxury sector.
The brokerage pointed to the company’s scale, brand strength, and consistent execution as key factors supporting its positive stance. While LVMH’s valuation has become slightly less attractive following recent share price gains, trading at 26 times RBC’s 2025 estimated price-to-earnings ratio, it remains a sector leader with long-term growth potential.
LVMH’s shares currently trade at 25 times forward earnings, slightly above the company’s 10-year historical average.
On an enterprise value basis, the stock is trading at 19 times EBIT and 4.5 times sales, both above historical norms.
Relative to the broader luxury sector, LVMH is trading at a 20% discount on a price-to-earnings basis but closer to its historical average on EBIT and sales multiples.
The brokerage reaffirmed its “outperform” rating, citing the company’s diversified business model, strong brand portfolio, and track record of mergers and acquisitions.
It noted that while revenue growth in the near term is likely to be below LVMH’s historical 7-8% annual average, the company’s longer-term fundamentals remain strong.