Zacks Investment Research upgraded Iconix Brand Group, Inc (ICON) to a Zacks Rank #1 (Strong Buy) on Apr 23 driven by a spate of accretive acquisitions made in the recent past. The company reported first quarter 2013 results on Apr 24 and raised its view for 2013, thus supporting the upgrade.
Why the Upgrade?
Iconix successfully completed three acquisitions in the past five months. In late-Feb 2013, Iconix acquired the renowned lifestyle brand Lee Cooper, which includes multiple lifestyle categories including men’s and women’s casual wear, footwear and accessories. In early-Feb 2013, Iconix formed a joint venture with Buffalo International ULC to acquire a 51% interest in the latter’s Buffalo David Bitton brand in order to expand its retail footprint in the U.S. and Canada. In early-Dec 2012, Iconix acquired the renowned football brand Umbro from Nike, Inc. (NKE) in order to further strengthen its portfolio with an iconic brand that focuses on the fashion, athletics, electronics, entertainment and home industries.
The successful completion of acquisitions helped the company deliver another solid performance in the first quarter of 2013. Iconix’s revenues in the quarter surged 19% year over year and surpassed the Zacks Consensus Estimate by 4%. First quarter earnings of 54 cents per share also beat last year’s result by 26% and the Zacks Consensus Estimate by 5.9%. In fact, Iconix has topped earnings estimates in nine out of the last twelve quarters.
Following the solid first quarter 2013 earnings, Iconix raised its 2013 adjusted earnings guidance to $2.10–$2.20 per share from the previously announced range of $2.05–$2.15 per share. The company had earlier raised its earnings guidance in fourth quarter 2012 to account for the effect of the acquisition of Lee Cooper.
Estimates have mostly increased after the strong first quarter results and bright outlook for the year. The Zacks Consensus Estimate increased 0.5% to $2.14 per share for 2013, while it grew 5.4% to $2.35 per share for 2014 over the past 7 days.
We remain impressed with Iconix’s strategic acquisitions and consistent expansion of licensing agreements. Iconix expects to explore additional opportunities and enhance its portfolio with more iconic brands. Iconix expects to deliver over 20% revenue and EPS growth for 2013.
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