On Aug 26, we reiterated our Outperform recommendation on Iconix Brand Group, Inc (ICON) on the back of its solid second quarter 2013 results and an enhanced guidance for the year.
Why the Reiteration?
Iconix reported solid second quarter 2013 results on Jul 24. Earnings of 72 cents increased 60% from the year-ago earnings, bolstered by top-line growth, strategic acquisitions and lower share count owing to buybacks.
Total revenue surged 23% year over year to $115.1 million backed by the company’s strong brand portfolio, recent acquisitions and continued focus on international expansion, which includes the new joint venture in Canada. The formation of the Canadian joint venture contributed approximately $9.8 million to current quarter revenues. Both earnings and revenues surpassed the Zacks Consensus Estimate.
Following strong second quarter 2013 results, Iconix raised its 2013 adjusted earnings guidance range to $2.20–$2.30 per share from the previously announced range of $2.10–$2.20 per share. The company has raised its earnings guidance consecutively in the last two quarters to include the impact of acquisitions made in the recent past. Moreover, Iconix expects to deliver over 20% revenue and earnings per share growth for 2013.
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 it added the rest of Ecko and Marc Ecko Cut & Sew under its banner in May 2013.
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.
Following the release of its second quarter results, most estimates were revised higher. The Zacks Consensus Estimate for fiscal 2014 went up 2.5% to $2.44 per share.
Other Stocks to Consider
Iconix holds a Zacks Rank #2 (Buy). Other stocks in the consumer discretionary sector worth considering are Skechers U.S.A. Inc (SKX) and Rocky Brands Inc (RCKY). While Skechers holds a Zacks Rank #1 (Strong Buy), Rocky Brands has a Zacks Rank #2.
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