LVMHF - Hermes: Consensus Estimates For 2024 Are Too Low (Rating Upgrade)

2024-02-16 05:07:42 ET

Summary

• Hermes ended 2023 on a strong note, as the company once again beat expectations handily and outperformed peers by a wide margin.
• The company is able to sustain double-digit growth in its core leather business while driving significant acceleration across the smaller segments, which should fuel continued outperformance.
• Valuation seems high, but Hermes is trading below its 5-year average levels despite a record-high net cash position for the company.
• I expect continued mid-teens EPS growth, which is much higher than current estimates, and upgrade Hermes to a Buy.

Hermes (HESAF) is truly a one-of-a-kind asset in the public markets. This family-owned 200-year-old business attracts the world's richest and top-tier celebs, without huge investments in brand ambassadors or marketing.

For quite some time, I stayed on the sidelines, as I viewed the company as too big to continue to grow its mono-brand at a similar pace while sustaining this level of desirability. Not anymore....

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