UBS analysts have identified Birkenstock Holding PLC (NYSE:BIRK), Gildan Activewear (NYSE:GIL), and PVH Corp. (NYSE:PVH) as top picks in the current market, citing their strong positioning to handle ongoing tariff pressures.
In a recent report, analysts highlighted these companies' ability to outperform their peers as the market remains concerned about the impact of tariffs, particularly those affecting China-based imports.
The analysts pointed to four key characteristics that make these stocks stand out: low exposure to imports from China, the ability to raise prices on high-cost products, strong EBIT margins, and global market share gains.
Birkenstock
Birkenstock, the German footwear brand, was singled out for its minimal exposure to China, with its products largely manufactured in Germany. This contrasts with many of its competitors, which source from China and may face significant pricing pressures due to tariffs.
UBS analysts noted that Birkenstock's high-priced products—such as its popular $150 sandals—offer room for modest price increases without significant volume loss.
Despite potential margin pressures, UBS forecasts a 14% compound annual growth rate (CAGR) in sales over the next five years, with a 20% EPS CAGR. The analysts argue that Birkenstock’s strong international presence and its status as a premium brand provide a hedge against tariff-related risks.
Gildan Activewear
Gildan Activewear, known for its dominance in the low-cost t-shirt and fleece markets, is also well-positioned to weather tariff concerns, according to UBS.
The company manufactures most of its products in Central America, avoiding much of the tariff impact faced by Asian-based competitors.
With a 21% EBIT margin, analysts believe that Gildan can absorb some tariff-related cost increases without severely affecting its bottom line.
UBS forecasts an 8% CAGR in Gildan’s earnings over the next five years, driven by continued global market share gains as competitors struggle with higher costs. The analysts highlighted the company’s position as the industry's low-cost leader as a key advantage in a potentially slowed consumer spending environment.
PVH
PVH, the parent company of brands like Tommy Hilfiger and Calvin Klein, is another UBS favorite. Trading at a relatively low 5.9x forward earnings, PVH has been under pressure due to concerns about tariffs and its exposure to China. However, UBS analysts believe these concerns are overstated.
The analysts noted that PVH sources only a small percentage of its goods from China and is in the midst of a $500 million share repurchase program. With strong self-help initiatives in place, including taking back licenses from GIII, PVH is expected to see sales growth accelerate. UBS predicts a 14% EPS CAGR over the next five years, with the potential for substantial upside should the company continue its recovery.
UBS also sees an attractive risk/reward profile for PVH, noting a 5:1 upside-to-downside ratio. In a more favorable scenario, where tariff and China fears prove overblown, PVH's earnings could surge, driving its stock price significantly higher.