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On Thursday, Bernstein SocGen Group updated its financial forecasts for Hermes International (OTC:HESAF) (RMS:FP) (OTC: HESAY (OTC:HESAY)), resulting in an increased price target on the stock to EUR2,850.00 from EUR2,450.00. The firm sustained its Outperform rating on the luxury goods company. The adjustment comes as Bernstein SocGen Group’s analyst Luca Solca revises projections to incorporate full-year 2024 and first-quarter 2025 pre-close comments. The company, currently valued at $283 billion, has demonstrated robust financial performance with a 13% revenue growth over the last twelve months and an impressive 70.26% gross profit margin, according to InvestingPro data.
Solca’s analysis indicates a positive outlook for Hermes, with an increase in the Group’s organic growth forecast for the fiscal year 2025 by 1.37 percentage points, reaching 13.5%. This growth is expected to be driven by an average increase in prices and volumes of 6-7% each within the leather goods category, which is anticipated to see organic growth of 15%, outperforming consensus estimates by 1.76 percentage points.
While the top-line forecasts for fiscal year 2026 remain largely unchanged, there has been a slight adjustment to the EBIT margin forecasts for fiscal year 2025, with a decrease of 0.10 percentage points to 40.5%. This revision reflects lower than expected margins for fiscal year 2024. However, margins are projected to improve throughout fiscal years 2025 and 2026 as foreign exchange headwinds and cost inflation are anticipated to subside.
In terms of earnings, Bernstein SocGen Group forecasts a fiscal year 2025 earnings per share (EPS) of €46.26 and €56.13 for fiscal year 2026. These figures are 1.5% below and 2.9% above consensus estimates, respectively. The revised estimates take into account an increase of approximately €350 million in taxes for fiscal year 2025 due to recent changes in the French corporate tax rate.
The valuation of Hermes by Bernstein SocGen Group is based on a target relative price-to-earnings (P/E) multiple of 3.70 times to the MSCI Europe, equating to a 52 times next twelve months plus one (NTM+1) P/E multiple. According to InvestingPro data, the stock currently trades at a P/E ratio of 56.84x, placing it among the more richly valued luxury goods companies. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value. The analyst’s positive stance on Hermes is reflected in the Outperform rating and the newly set price target of EUR2,850.00.
In other recent news, Hermes International has garnered attention with notable developments. Bernstein analysts have maintained their Outperform rating for Hermes, setting a price target of EUR 2,450. This decision is based on Hermes’s strategic approach of limited production, which has proven effective in maintaining exclusivity and demand, especially for its iconic handbags. Bernstein anticipates robust fourth-quarter and full-year 2024 results, with expected global like-for-like pricing tailwinds for fiscal year 2025 estimated at around 7%.
In a separate analysis, Stifel has upgraded Hermes from Hold to Buy, raising the price target from EUR 2,150 to EUR 2,560. This upgrade reflects a positive outlook on Hermes’s financial performance, with forecasts for fiscal years 2025-26 EBIT now standing 3-4% above consensus estimates. Stifel attributes this optimism to Hermes’s untapped pricing power, high demand for its leather goods, and a strong customer base. Despite potential foreign exchange challenges, Hermes is expected to maintain its profit margins in 2025, showcasing its competitive edge in the luxury market.
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