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Bull of the Day: Movado (MOV)

Madeleine Johnson
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Bull of the Day: Movado (MOV)

Movado Group (MOV) is a leading global watchmaker that designs, manufactures, and distributes watches from some of the most recognized and respected names in time: Movado, Concord, Ebel, Olivia Burton, Coach, Hugo Boss, Lacoste, Tommy Hilfiger, Scuderia Ferrari, Rebecca Minkoff, and Uri Minkoff. Collectively, their timepieces are sold throughout North and South America, Europe, and Asia.

Movado, the flagship brand within the Movado Group portfolio, was founded in Switzerland in 1881 and acquired by the parent company in 1983.

Q4 Results Send Shares Soaring

Last month, the Zacks Rank #1 (Strong Buy) Movado knocked it out of the park when it released results for its fiscal 2018 fourth quarter.

Earnings of 52 cents surged past the Zacks Consensus of 26 cents per share, while revenues of $149 million also beat our consensus estimate and grew 14.1% year-over-year. The company also saw a solid 6.4% increase in comparable-store sales.

As a result, shares of MOV shot up nearly 16% in response to this beat on both the top and bottom line.

Chairman and CEO Efraim Grinberg credited the company’s outperformance last quarter to strong momentum within its owned and licensed brands, and this includes the $84 million acquisition of Olivia Burton from last year. Movado also saw accelerated growth in the UK, France, and Germany.

Looking Ahead

Management expects net sales in the range of $605 million to $615 million, compared to Wall Street's estimates for full fiscal-year sales of just $571 million.

Additionally, Movado increased its quarterly dividend by 54% to $0.20 per share, an outcome of the company’s strong balance sheet; Movado ended Q4 with $214.8 million in cash at the end of the quarter and expects benefits from the recent tax reform.

"As we focus on expanding our online presence given an evolving retail landscape, we are encouraged by the progress made in the quarter with our digital initiatives in support of our global portfolio,” notes Grinberg.

Earnings Outlook

For MOV, its bottom line is trending upward for the foreseeable future.

Earnings are expected to grow an astounding 1,100% for the current quarter. While no analysts have revised estimates upwards recently, the Zacks consensus has moved from $0.11 to $0.12 in the past 30 days.

Fiscal 2019 figures are also looking pretty great, with 2 estimates moving higher in the past two months. The Zacks consensus estimate trend has jumped from $1.92 per share to $2.24 per share.

Earnings estimates for fiscal 2020 are on the rise as well. The current consensus sits at $2.39 per share, and earnings are expected to grow almost 7% from this year.

Can MOV push higher?

Shares of Movado have gained about 20% since the start of the year, and well over 62% in the past one-year period. In comparison, the S&P 500 has lost roughly 0.12% and gained 13.7%, respectively.

Movado Group Inc. Price and Consensus

Movado Group Inc. Price and Consensus | Movado Group Inc. Quote

MOV is currently trading at a forward P/E of 17.4X.

While its industry, Retail-Jewelry, has lost around 9% year-to-date, the group actually sits in the top 32% of all industries ranked by the Zacks Industry Rank. And, MOV is one of the top performers, especially when compared to industry peers like Tiffany & Co. (TIF) and Signet Jewelers (SIG).

Taking into account its impressive price appreciation over the last one-year period, as well as its expected earnings growth, Movado could be an exciting opportunity for investors looking to get in to the retail space.

Movado is expected to report its next quarterly earnings at the end of May.

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