On Jul 4, 2013, Zacks Investment Research upgraded Nautilus Inc. (NLS) to a Zacks Rank #1 (Strong Buy) shortly after this consumer fitness products provider was added to the prestigious Russell Global and Russell 2000 Indexes.
The share price of the stock has been on the rise since this announcement on Jul 1, gaining 4.7% in just 2 days.
Why the Upgrade?
Nautilus outperformed the Zacks Consensus Estimate in the last four quarters with an average surprise of 156.5%. The stock has provided a stellar one-year return of 169.6%. In fact, this consumer fitness products company turned around from a loss making entity to deliver profits in less than last four quarters. This aggressive growth earned Nautilus a place in the Russell Global index.
Solid First Quarter Results
On May 6, Nautilus’s first-quarter adjusted earnings of 18 cents per share breezed past the Zacks Consensus Estimate by 50.0% and year-ago results by 100.0%. The company’s net sales surged 15.5% to $51.3 million. In particular, the Direct segment experienced solid revenue growth, thanks to increased demand for Nautilus’s cardio products.
Gross margin in the quarter improved 520 basis points to 51.8%, buoyed by higher margins in both Retail and Direct businesses. Sustained shift of sales to higher margin cardio products in the Direct channel has been benefiting Nautilus immensely. Operating margin also improved 460 basis points to 10.1%, driven by efficient management of overheads.
Nautilus is expected to report its second-quarter earnings on Aug 7, 2013. The Zacks Consensus Estimate for the upcoming quarter is 2 cents, representing a massive year-over-year increase of 183.3%. The company has a new lineup for cardio products ready for shipment this fall. This category of products is quite popular and is likely to boost company sales in the near term.
Estimates for full year 2013 and 2014 moved north over the last 60 days, while none went south. The Zacks Consensus Estimate for 2013 was up about 4.3% to 49 cents over the said time frame, representing a year-over-year increase of 43.1% while the estimate for 2014 moved up 1.6% to 64 cents indicating a year-over-year improvement of 32.2%.
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