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  Title	The Best Consumer Cyclical Stocks to Buy
  ID	29820943
  External ID	bfc5076dfa1e594f9b900548d2244198
  Author	Tori Brovet
  Published Date	Nov. 18, 2025, 3 a.m.
  Summary	These 12 undervalued consumer cyclical stocks look attractive today.
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  URL	https://www.morningstar.com/stocks/best-consumer-cyclical-stocks-buy
  Sentiment	Negative: 0.03860    Neutral: 0.83531    Positive: 0.12609
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  Content ID	37335249
  Key	bea88398-78dd-4929-ae7b-91a0abdfab9b
  Content	Consumer cyclical stocks are typically popular with investors when the economy is growing because that's when consumers are more likely to spend money on discretionary items. Conversely, investors are usually less interested during economic slowdowns and recessions, when consumers spend less. In the year to date, the Morningstar US Consumer Cyclical Index rose 3.20%, while the Morningstar US Market Index gained 15.25%. The 12 Best Consumer Cyclical Stocks to Buy Now These were the most undervalued consumer cyclical stocks that Morningstar's analysts cover as of Nov. 13, 2025. Under Armour UAA UA Adient ADNT CarMax KMX Bath & Body Works BBWI Caesars Entertainment CZR VF VFC Kohl's KSS Winnebago Industries WGO Capri Holdings CPRI JD.com JD Gentex GNTX PVH PVH To come up with our list of the best consumer cyclical stocks to buy now, we screened for: Consumer cyclical stocks that are undervalued, as measured by our price/fair value metric. Stocks that earn narrow or wide Morningstar Economic Moat Ratings, as well as companies that do not have a moat. We think companies with narrow economic moat ratings can fight off competitors for at least 10 years; wide-moat companies should remain competitive for 20 years or more. Stocks that earn a Low, Medium, High, or Very High Morningstar Uncertainty Rating, which captures the range of potential outcomes for a company's fair value. Here's a little more about each of the best consumer cyclical stocks to buy, including commentary from the Morningstar analysts who cover each company. All data is as of Nov. 13, 2025. Under Armour Apparel manufacturing company Under Armour is the cheapest stock on our list of the best consumer cyclical stocks to buy. Under Armour develops, markets, and distributes athletic apparel, footwear, and accessories in North America, Asia-Pacific, Europe, and Latin America. The stock is trading 68% below our fair value estimate of $13.80 per share. We view Under Armour as lacking a moat, given its failure to build a competitive advantage over other athletic apparel firms. Between 2008 and 2016, the company's North American sales increased to $4 billion from $700 million, and it passed Adidas as the region's second-largest athletic apparel brand after Nike. However, Under Armour's North America sales have barely grown over the past decade due to challenges from established competitors and new entrants. CEO Kevin Plank intends to return the firm to its glory years as a performance sports pioneer, but signs of progress have been hard to find. Under Armour has struggled with both its direct-to-consumer and wholesale businesses. Although annual sales through its direct-to-consumer channels increased to about $2.1 billion in fiscal 2025 from $1.5 billion in 2016, Nike and others experienced greater direct-to-consumer growth in this period. Under Armour has opened its own stores as wholesale distribution has slowed, but 90% of them in North America are off-price. Still, we forecast its direct-to-consumer revenue will rise to 51% of total revenue in fiscal 2035 from 40.5% in fiscal 2025. This growth should allow Under Armour to have better control over its brand, but we do not think it can achieve premium pricing. Under Armour's international segment ($2.1 billion in fiscal 2025 sales) should produce growth over the long term, but the firm faces significant competition from global and native operators with established brands and distribution networks. According to Euromonitor, the combined sportswear markets in Asia-Pacific and Western Europe total about $186 billion at retail in 2025, greater than North America's $167 billion. As Under Armour generated only about 36% of its revenue in Europe, the Middle East, and Africa and Asia-Pacific in its fiscal 2025, we think it has room for growth, but it lacks strong retail partnerships and brand recognition. Under Armour expects about $100 million (or about 2% of sales) in additional costs in fiscal 2026 from higher US tariffs. Given its lack of pricing power and sales weakness, we believe it will be challenging for the company to offset the expense through price hikes. Adient Morningstar Price/Fair Value: 0.33 Morningstar Uncertainty Rating: Very High Morningstar Economic Moat Rating: Narrow Industry: Auto Parts Adient began trading Oct. 31, 2016, when Johnson Controls spun off its automotive experience segment. The firm earns a narrow economic moat rating, and the shares of its stock look 67% undervalued relative to our $64 fair value estimate. Adient is the automotive seating business of Johnson Controls that was spun off to JCI shareholders in a taxable transaction Oct. 31, 2016. Adient leads the seating market with about 33% share globally. We think ignoring Adient just because it is an auto-parts supplier is shortsighted. Seating is one of the stickiest parts of the supplier sector since it is very difficult to take out an incumbent on a vehicle program, and automakers need suppliers that can consistently deliver high-quality seats in a just-in-time system throughout the world. Automakers have global platforms and are willing to pay for the right supplier rather than the supplier simply with the lowest price. We think the seating sector can benefit from autonomous and electric vehicles rather than be hurt by the change because AVs and EVs open up new seating configurations and possibly more electronics content in seats. We think some investors may need to reframe their perspective on seating and auto suppliers space by understanding that seating is not a commodity product and that firms such as Adient have a narrow economic moat with maintainable competitive advantages from three moat sources: intangible assets, switching costs, and cost advantage. It is normal in the seating space, for example, that an incumbent supplier gets the next generation of a vehicle program nearly 100% of the time so business is very sticky. At the end of fiscal 2021, Adient consolidated some of its Chinese seating joint ventures so it can pursue business with more Japanese, German, and startup electric vehicle firms in China. We think the company can increase operating margin including equity income over the next several years by restructuring its operations to be a better manufacturer and the joint venture sales brought good cash flow to reduce debt. Management also formed a joint venture with Boeing in January 2018 focused on business-class seats, of which Adient owns 19.9%. For patient investors who can wait for the company to restructure and poor metals contracts to expire in fiscal 2026 and fiscal 2027, we see Adient as a good turnaround story with improving free cash flow generation and occasional share repurchases. CarMax Morningstar Price/Fair Value: 0.35 Morningstar Uncertainty Rating: High Morningstar Economic Moat Rating: Narrow Industry: Auto & Truck Dealerships Next on our list of the best consumer cyclical stocks to buy is CarMax. CarMax sells, finances, and services used and new cars through a chain of over 250 used retail stores. The stock is trading at a 65% discount to our fair value estimate of $99 per share. CarMax's revenue has grown at a compound annual rate of 10.8% since fiscal 2000 from the success of customer-friendly sales practices and use of information technology. We think the firm will eventually reach its over 5% zero to 10-year-old vehicle market share target, up from 3.7% in calendar 2023 and 2024. However, goals of $33 billion in revenue and selling a combined 2 million annual retail and auction units may change with a new CEO. Competing dealerships have tried no-haggle pricing and failed because their salesforces are trained to focus on selling vehicles that earn the highest possible gross profit rather than vehicles that customers actually want or need. A traditional dealership relies on profits from service to offset the typically lower margins it gets on new-vehicle sales. CarMax does not hire salespeople from the auto industry, and salespeople receive the same commission regardless of the vehicle sold. They do not even know the profit on the vehicle sold. The CarMax customer stays with the same salesperson throughout the transaction rather than being passed off to a finance department, receiving a buying experience that is hard to match at a dealership. This focus on customer satisfaction, combined with scale advantages, a wide inventory selection, and extensive pricing data, creates a narrow economic moat. Management has said repeatedly that it will give any further improvements in operating expenses back to the customer as a price decrease instead of seeking higher gross margins. We like this strategy though it may change in fiscal 2027 with a new CEO. CarMax's scale allows it to price below smaller dealerships, and lowering prices should increase comparable-store sales long term. The company can often make up any lost margin via its highly profitable finance arm, CarMax Auto Finance. CAF finances over 40% of unit sales. The company's omnichannel program, which in fiscal 2025 made up 66% of the nearly 800,000 retail units sold, enables consumers to shop in any combination of digital and in store that they like and should allow for fewer store openings over time. These factors should keep the company growing for years, despite more competition. Bath & Body Works Morningstar Price/Fair Value: 0.35 Morningstar Uncertainty Rating: High Morningstar Economic Moat Rating: Narrow Industry: Specialty Retail Bath & Body Works is a specialty home fragrance and fragrant body care retailer operating under the Bath & Body Works, C.O. Bigelow, and White Barn brands. Bath & Body Works is an affordable consumer cyclical stock, trading at a 65% discount to our fair value estimate of $62 per share. The specialty retail firm earns a narrow economic moat rating. We believe Bath & Body Works has carved out a solid competitive edge in the sizable addressable markets in which it operates. The company's strong brand intangible asset is supported by its leadership position across the bath and shower and candle air freshener industries in recent years, which has been bolstered by BBW's quick response to consumer trends. Quantitatively, the narrow moat is reinforced by a 34% average return on invested capital excluding goodwill that we expect the business to generate over the next decade, well ahead of our 8% weighted average cost of capital estimate. Outside of the $19.9 billion haircare, $13.3 billion bath and shower, and roughly $700 million hand sanitizer markets in North America (Euromonitor), we think the beauty and other category adjacencies still offer a plethora of upside over time relative to BBW's 2024 sales of $7.3 billion. The firm has outlined a compelling pipeline of opportunities to reach new consumers and stimulate sales conversion ahead. For example, not only can BBW add expansion products like shaving and facial care, but it can also expand its nascent penetration in categories like haircare, men's care, lip, and laundry. This robust pipeline of opportunities should support average sales growth of 3% over fiscal 2025-29 (including a 2.6% hike in 2025). We forecast sales of $8.5 billion in 2029, which is contingent on average sales growth of 3% from North American stores, 3% from the digital channel, and 5% from international opportunities. This should be supported by elevated engagement with the brand, as there is more than 80% brand awareness among women 18-59 years old (and 60% of men in the same cohort). Longer-term, operating margins should remain in the high teens (versus a 16.3% estimate in 2025) as the firm focuses on elevating the experience through digital and physical lines. With consumer spending continuing to center around experiences, BBW should see solid demand trends ahead, with our forecast for organic growth above the less than 2% growth projection (Euromonitor) for the North American beauty and personal care industry during 2025-29. Growth could be faster with new line extensions. How to Rebalance Your Portfolio Before 2026 There is no one-size-fits-all approach. Here's what to keep in mind. 7m 12s Oct 29, 2025 Caesars Entertainment Caesars Entertainment includes about 50 domestic gaming properties across the Las Vegas (49% of 2024 EBITDAR before corporate expenses) and regional (46%) markets. The stock is trading at a 62% discount to our fair value estimate of $52 per share. Caesars' Vegas demand is hindered by softer leisure visitation that is affected by near-term economic uncertainty. But we expect Caesars to hold a leading high-single-digit revenue share of the $72 billion domestic commercial casino gaming market for the foreseeable future, given its strong asset position in the region. The Eldorado acquisition in 2020 roughly doubled the company's US portfolio to about 50 properties while lifting its loyalty membership to over 60 million from 55 million. Caesars has realized over $1 billion in combined sales and cost synergies from its July 2020 merger with Eldorado, representing around a 30% increase to pro forma 2019 EBITDAR. Legacy Eldorado successfully integrated the Isle of Capri and Tropicana acquisitions in 2017 and 2018, respectively, with both deals driving about a 30% return on investment, based on our calculation. Despite this successful acquisition record, we don't believe Las Vegas and other US gaming regions contribute to a moat for Caesars. US gaming demand is lower than in Asian regions like Macao and Singapore, where the propensity to gamble is much higher. Also, the 1,000 commercial and tribal casinos in the US serve a total population of 340 million, well in excess of the 30 and 2 casinos found in Macao and Singapore, respectively, with Chinese and Singaporean populations of 1.4 billion and 6 million. We see no additional licenses in Macao and Singapore for the foreseeable future. However, Caesars' 2024 digital revenue growth of 20% and EBITDA margin of 10% show that the company is positioned to benefit in a US online gaming market that we see reaching $56 billion by 2030 from $24 billion in 2024. Despite competition from ESPN Bet, DraftKings, FanDuel, MGM, Fanatics, and others, we forecast 20% of Caesars' total sales will be generated from online gaming by 2030. Also, while predictive event competition presents some risk to traditional betting platforms, we believe they can expand the sports betting opportunity, and not just cannibalize it, with traditional online platforms continuing to offer the superior experience. VF Morningstar Price/Fair Value: 0.39 Morningstar Uncertainty Rating: Very High Morningstar Economic Moat Rating: None Industry: Apparel Manufacturing VF designs, produces, and distributes branded apparel, footwear, and accessories. The stock is trading at a 61% discount to our fair value estimate of $39.50 per share. VF has built a portfolio of solid brands in multiple apparel categories, but we do not believe it has a competitive advantage. Vans and Timberland have been drivers of value historically, but both have had uneven results over the past couple of years. The North Face has been more consistent, but we do not believe this brand alone can provide a moat for the company. The main goals of CEO Bracken Darrell's Reinvent turnaround plan are to generate as much as $600 million in annual savings by fiscal 2028, reduce debt aggressively, operate more efficiently in the Americas, and improve Vans' sales and profitability through product innovation and supply chain optimization. We think the aims of this plan are reasonable and will improve results. VF reported a woeful 5.9% adjusted operating margin in fiscal 2025, but we forecast its operating margins will gradually rise to nearly 9% by fiscal 2028 as it implements its strategic plan. Given disruption from tariffs and other issues, this projection is below the 10% operating margin target revealed at VF's October 2024 analyst event. Vans ($2.3 billion in fiscal 2025 sales; 25% of total) has grown from its roots in action sports into an everyday athleisure brand but has lost momentum. We think VF's plans will work in the medium term and believe Vans has room for growth as it has less than 2% share in a global sports-inspired apparel and footwear market estimated at $171 billion at retail in 2025 (Euromonitor). Meanwhile, The North Face ($3.7 billion in fiscal 2024 sales; 39% of total) has been a consistent driver of profit growth due to product innovations, brand extensions, and expansions of its direct-to-consumer business. We believe it has grown beyond its outdoor roots and become a leading brand for winter coats and other categories. VF sold Dickies for $600 million. This disposition simplifies VF's portfolio and allows management to focus on brands with more potential. Regarding higher US tariffs, VF anticipates about $60 million-$70 million in added cost of goods sold in fiscal 2026 after price increases and other mitigation efforts. It remains to be seen if tariffs will depress demand for apparel and footwear. Kohl's Morningstar Price/Fair Value: 0.44 Morningstar Uncertainty Rating: Very High Morningstar Economic Moat Rating: None Industry: Department Stores Kohl's operates about 1,150 department stores in 49 states that sell moderately priced private-label and national brand clothing, shoes, accessories, cosmetics, and home furnishings. This cheap stock looks 56% undervalued and has a fair value estimate of $40 per share. We assign a no-moat rating to Kohl's, which has had consistently declining sales over the past 10 years. We think its competitors, such as wide-moat Amazon and other online sellers, discount, and specialty retailers, will continue to siphon apparel sales from it and other department stores. Thus, while Kohl's has responded to threats with increased e-commerce, improved merchandising, and an enhanced loyalty program, we project its operating margins in the midsingle digits in the long run, well below prepandemic levels. Kohl's has strengths, including its reputation for reasonable prices, off-mall locations, and more than 30 million loyalty members. Moreover, its annual e-commerce sales have increased from about $700 million in 2010 to more than $4 billion at present. However, it is still a physical store-based business, and both store visitation and sales per square foot have declined steadily over the past 15 years. We believe Kohl's large fleet of big-box stores is unnecessary in an increasingly fragmented market. Adding to its woes, Kohl's is operating with an interim CEO, former Walmart executive Michael Bender, after its former leader was let go after less than four months. The firm is in desperate need of stability; Bender is its fifth CEO in the last decade. Bender and, eventually, Kohl's next permanent CEO will likely focus on the company's merchandising and maintaining its reputation for quality and value. However, the firm has been implementing turnaround plans for years and nothing has really worked. In 2021, it set long-term goals of operating margins of 7%-8% and EPS growth in the mid- to high-single digits, but we think it will struggle to achieve these goals given its lack of a competitive edge. Meanwhile, Kohl's faces tariff risk as most of its merchandise is either imported by it or its vendors. The firm may be able to mitigate some of the additional cost over time, but we anticipate some margin compression in the short run at least. After a proxy battle and a failed attempt to sell the company in 2022, Kohl's remains vulnerable to activist investors. The value of its owned real estate is potentially greater than its current enterprise value. Winnebago Industries Morningstar Price/Fair Value: 0.45 Morningstar Uncertainty Rating: Very High Morningstar Economic Moat Rating: None Industry: Recreational Vehicles Winnebago Industries manufactures Class A, B, and C motor homes along with towables, customized specialty vehicles, boats, and parts. The stock is trading at a 55% discount to our fair value estimate of $75 per share. Winnebago, which reinvented itself under CEO Mike Happe with the November 2016 acquisition of high-end towable maker Grand Design, sees itself as a leading outdoor lifestyle firm. It now has a marine segment with Chris-Craft and Barletta. Towables is an area the company had long wanted to grow in, but had remained very small since acquiring SunnyBrook in 2011. Winnebago's North American towables share is approximately 10%, up from under 2% before Grand Design, so we see a long growth runway if it can continue to chip at Thor's and Forest River's roughly 80% combined share. In fiscal 2025, towables were about 44% of total revenue compared with just 9% in fiscal 2016. Marine was 13% of fiscal 2025 sales, and Barletta is now the number-three brand in aluminum pontoons with 9% share. Management wants non-RV revenue to be 15%-20% of total sales. Leadership identifies opportunities to grow with products in new segments, such as off-roading and lower price points (but not the most affordable in a segment). Grand Design expansion into motor homes in fiscal 2024 should boost RV market share (11.1% in fiscal 2024). Models are no longer cloned, which should help dealer profitability, and are positioned around a good, better, best framework. A unit is not manufactured until it has an order, which should mean lower, but not zero, discounting. Acquisitions in the over $1 trillion outdoor activity market will likely only be for high-end brands such as Chris-Craft and Newmar. Industry data shows that 8.1 million US households owned an RV in 2025, with another 16.9 million intending to buy one within five years. 2025 Recreational Vehicle Association data reveals that the age mix of these owners is 62% under 55, and 16% are 18-34. The median age is 49. Of owners, 34% have a household income over $100,000. Hispanic and Black consumers were 25% of campers in 2020, up from 8% in 2012, so Winnebago has a wide consumer base to tap into if it executes right. We think Winnebago's brand equity gives it a good shot at capitalizing on these trends. Capri Holdings Capri Holdings is a marketer, distributor, and retailer of upscale accessories and apparel in the Americas, Europe, and Asia. This cheap stock looks 52% undervalued and has a fair value estimate of $45 per share. Capri is led by Michael Kors (68% of fiscal 2025 sales), a major brand in the attractive midtier handbag market. However, we believe the label lacks the brand strength to provide an economic moat for Capri, rating poorly on the criteria that Morningstar uses to evaluate luxury brands, such as conspicuousness of consumption, pricing power, and control over distribution. Powered by store openings and retail expansion during 2010-15, Michael Kors became one of the largest American handbag producers in sales and units. However, the brand's sales are projected at less than $3 billion in fiscal 2026, down from a peak of $4.7 billion in fiscal 2016, due to markdowns at third-party retail, store closures, and weakness in some categories. While Capri has reduced the distribution of the label to limit discounting of its bags, it faces challenges such as slowing consumer spending on apparel and accessories, intense competition, and lower wholesale orders. Given that the brand generates essentially all the company's profit, Capri's focus must be on improving Michael Kors' standing with consumers. We think the label has growth potential in China as it is underpenetrated in the market relative to comparable apparel and accessories brands. Although China's luxury market has been weak lately, it possesses the largest addressable population in the long run (Bain). Prior to the pandemic, Capri spent $3.4 billion to purchase Jimmy Choo and Versace to boost its status as a luxury house and reduce its dependence on Michael Kors. This strategy has largely failed, and Capri has agreed to sell Versace to narrow-moat Prada for $1.375 billion, a discount from its original purchase price of more than $2 billion. Meanwhile, Jimmy Choo is unprofitable, and sales have been declining. Plans for the brand include new footwear styles and a greater focus on accessories. Capri faces an estimated $85 million in higher tariff expenses in fiscal 2026. As both Michael Kors and Jimmy Choo are struggling and lack pricing power, we think these extra costs can only be partially offset through cost cuts, supply chain changes, and limited price hikes. JD.com Morningstar Price/Fair Value: 0.51 Morningstar Uncertainty Rating: High Morningstar Economic Moat Rating: Wide Industry: Internet Retail JD.com is the third-largest Chinese e-commerce platform by GMV in 2024. It offers a wide selection of authentic products with speedy and reliable delivery. The firm earns a wide economic moat rating, and the shares of its stock look 49% undervalued relative to our $60 fair value estimate. JD.com offers authentic products from its online first-party (1P) business with speedy and high-quality delivery service. It adopts an asset-heavy 1P model with self-owned inventory and largely self-built logistics, complemented by an asset-light third-party (3P) model. By comparison, its competitor Alibaba relies mostly on a 3P model. Underperforming Pinduoduo and Douyin, JD's GMV/online retail sales of goods has decreased from 30.7% in 2021 to 28.4% in 2024. To reinvigorate growth, JD wants to change customers' mindshare of JD as an everyday low-price platform and has launched a CNY 10 billion subsidy program to attract price-sensitive customers. It stopped selling of nonstrategic low-margin products from the 1P business and allowing 3P merchants and business partners to provide these products instead. JD.com is also streamlining its organization to increase its ability to respond to quickly changing market dynamics. We expect JD.com to see good sales growth this year as national trade in subsidy program started in the fourth quarter of 2024. In the medium term, we expect to see gradually increasing margin, after cutting much of its unprofitable businesses such as community group purchase, Jingxi, and international businesses in 2022. JD.com will continue to put more emphasis on high-quality profitability instead of low-quality growth. JD's logistics business JDL became an independent business unit that opens its services to third parties. JDL has achieved record profitability and is expanding internationally, which will put slight pressure on margins. JD is a long-term margin expansion story driven by increasing scale from its 1P and 3P businesses. Larger scale in each category will increase its bargaining power with suppliers. Since 2016, JD no longer fully reinvests its gains from improving scale and is committed to delivering annual margin expansion in the long run. The increase in mix from higher-margin third-party platform business and efficiency of scale will help lift margins. JD is making inroads into on-demand services. It proposed to acquire all shares of Dada Nexus in January 2025 and announced its official launch of food delivery services. Gentex Morningstar Price/Fair Value: 0.55 Morningstar Uncertainty Rating: Medium Morningstar Economic Moat Rating: Narrow Industry: Auto Parts Gentex was founded in 1974 to produce smoke-detection equipment. Trading 45% below our fair value estimate, Gentex has an economic moat rating of narrow. We think shares of this stock are worth $42 per share. Gentex manufactures auto-dimming interior and exterior electrochromic mirrors. These mirrors automatically darken to eliminate headlight glare for drivers and have many other applications. With over 2,300 patents worldwide, some valid through 2046, and over 85% market share, up from 77% in 2003, Gentex has a narrow economic moat it should be able to protect for a long time, in our opinion. The growth prospects for auto-dimming mirrors look strong. We estimate that in 2024, about 34% of all light vehicles produced had interior auto-dimming mirrors, and exterior auto-dimming penetration is roughly half that of interior. Demand remains healthy with annual revenue growth often exceeding industry vehicle production growth. Growth will come from increased vehicle penetration as more automakers make the safety benefit of auto-dimming technology available, Gentex's research leading to new, advanced-feature mirrors that ultimately become standard products, and markets beyond autos such as healthcare, home connectivity, aviation, and the 2025 VOXX acquisition brings audio equipment. Active safety is a very fast-growing field, so more camera products are likely to show up on other vehicle programs and Gentex develops its own cameras. A recent example is the full-display mirror, which the driver can toggle between a normal auto-dimming mirror and a display image while driving at high speed. Other growth areas include biometrics in mirrors and nanofiber chemical sensing technology, which we see having application in autonomous ride hailing, dimmable sunroofs, and universal toll payments. Gentex also owns HomeLink, an in-vehicle connectivity system linking the vehicle to one's residence for garage or Internet of Things applications. The future beyond autos (98% of revenue) looks bright to us, too. The company supplies auto-dimming passenger windows for the Boeing 787, 777X, and the Airbus A350. Gentex is also exploring healthcare smart lighting applications with the Mayo Clinic, movable lighting in airplane passenger cabins, nanofiber sensing that could have security uses outside of the auto industry, and using its camera technology to help the visually impaired. PVH Morningstar Price/Fair Value: 0.56 Morningstar Uncertainty Rating: High Morningstar Economic Moat Rating: None Industry: Apparel Manufacturing Apparel manufacturing company PVH rounds out our list of best consumer cyclical stocks to buy. PVH designs and markets branded apparel in more than 40 countries. The stock is 44% undervalued relative to our fair value estimate of $140 per share. Once known as a producer of midtier men's shirts, PVH transformed itself by purchasing fashion brand Calvin Klein in 2003, Tommy Hilfiger in 2010, and Calvin Klein licensee Warnaco in 2013. More recently, it disposed of most of its noncore labels to focus on Calvin Klein and Tommy Hilfiger. While the firm lacks diversification, we think it was prudent to focus on its highest-potential properties and return capital to shareholders through share repurchases. However, although they are popular worldwide, we do not believe that either of PVH's major brands has the pricing power or competitiveness to provide an economic moat. PVH is contending with a tough US wholesale market, a trade war, and a slowdown in demand in Western Europe. Due to industry conditions and competition, it will fall far short on its PVH+ plan's 2025 targets of $12.5 billion in revenue and a 15% adjusted operating margin; our estimates are $8.9 billion and 8.6%, respectively. Even so, we view the company's key brands as healthy and believe efforts to elevate products, achieve cost efficiencies, and build e-commerce will result in consistent earnings growth after this year. Further, over the next three years, PVH will take back licenses for women's apparel and other products from G-III, a move that we believe will increase profits in the long run as G-III licensing currently accounts for less than 10% of earnings. Over the past 15 years, the share of PVH's total revenue generated in the US declined to about 30% from nearly 90% as the firm disposed of some brands and its two major labels struggled in the region. Indeed, growth rates and operating income for the international segments of Calvin Klein and Tommy Hilfiger have often exceeded those of their North American segments over the past few years. We believe PVH has failed to connect with North American consumers, unlike some of its peers. Like others in its industry, PVH is adjusting its supply chain to minimize tariff expense. We do not think it has sufficient pricing power to pass all the costs to consumers. How to Find More of the Best Consumer Cyclical Stocks to Buy Investors who'd like to extend their search for top consumer cyclical stocks can do the following: Review Morningstar's comprehensive list of consumer cyclical stocks to investigate further. Stay up to date on the consumer cyclical sector's performance, key earnings reports, and more with Morningstar's consumer cyclical sector page. Read Morningstar's Guide to Stock Investing to learn how our approach to investing can inform your stock-picking process. Use the Morningstar Investor screener to build a shortlist of consumer cyclical stocks to research and watch. The Best Financial-Services Stocks to Buy The Best Healthcare Stocks to Buy The Best Industrials Stocks to Buy The Best REITs to Buy The Best Utilities Stocks to Buy The Best Tech Stocks to Buy
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