On Nov 22, we reiterated our Outperform recommendation on Iconix Brand Group, Inc (ICON) given its solid third quarter 2013 results and an enhanced guidance for the year.
Why the Reiteration?
Iconix reported solid third quarter 2013 results on Oct 30. Earnings of 59 cents increased 44% from the year-ago earnings, bolstered by top-line growth, strategic acquisitions and lower share count owing to buybacks. Earnings also surpassed the Zacks Consensus Estimate.
Total revenue surged 24% year over year to $107.2 million backed by the company’s recent acquisitions (Umbro, Buffalo and Lee Cooper) and continued focus on international expansion, which includes the new joint venture in Australia. The formation of this new joint venture in Australia contributed approximately $5 million to the current quarter’s revenues. Revenues however slightly missed the Zacks Consensus Estimate.
Following the solid third quarter 2013 result, Iconix raised its 2013 adjusted earnings guidance to $2.30–$2.40 per share from the previously announced range of $2.20–$2.30 per share. The company has raised its earnings guidance in all the three quarters of 2013, which reflects the company’s growth potential. Moreover, Iconix expects to deliver over 20% revenue and earnings per share growth for 2013.
After the strong third quarter results and the increase in guidance, most estimates were revised higher. The Zacks Consensus Estimate for 2013 went up 1.7% to $2.33 per share. For 2014, the Zacks Consensus Estimate increased 0.8% to $2.46 per share.
Iconix’s overall growth story looks compelling. This clothing brand licensing company has been aggressively acquiring brands and entering into joint ventures to expand its portfolio. Most recently, the company purchased approximately 14.4% minority interest in Complex Media, a multi-media lifestyle company and owner of Complex magazine and its online counterpart, Complex.com in Sep 2013. In Jul 2013, the company purchased a 10% minority interest in Marcy Media, which is a multi-media portfolio company. In May, it added the rest of Ecko and Marc Ecko Cut & Sew under its banner.
In late Feb 2013, Iconix acquired the renowned lifestyle brand Lee Cooper and earlier in the same month formed a joint venture with Buffalo International ULC to acquire a 51% interest in the latter’s Buffalo David Bitton brand. The acquisition of the renowned football brand Umbro from Nike, Inc. (NKE) in Dec 2012 added another iconic brand to its portfolio.
Iconix holds a Zacks Rank #2 (Buy).
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