Iconix Brand Group, Inc. (ICON) posted third quarter 2013 adjusted earnings of 59 cents per share, beating the Zacks Consensus Estimate of 51 cents by 15.7% and the year-ago earnings of 41 cents by 44%. The upswing in earnings can be attributed to solid revenues, strategic acquisitions and lower share count owing to share buyback.
Quarter in Detail
Though revenues slightly missed the Zacks Consensus Estimate of $108 million, total revenue in the quarter surged 24% year over year to $107.2 million. The results were driven by the company’s strong brand portfolio, 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. Similarly, in the prior quarter, the formation of the company’s joint venture in Canada had contributed approximately $9.8 million to revenues.
On a year-over-year basis, earnings before interest, taxes, depreciation, and amortization (:EBITDA) increased 27% to $65.6 million in the third quarter.
Iconix exited the quarter with free cash flow of $54.3 million compared with $60.8 million at the end of the second quarter of 2013.
In the third quarter, Iconix bought back 3.1 million shares at an average price of $27.07. The company now has $250 million remaining under the $300 million stock repurchase program. Since the initiation of the share repurchase program in Oct 2011, the company has repurchased approximately $551 million of its stock.
Guidance for 2013
Following the solid third quarter 2013 earnings, 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 been raising its guidance since the last three quarters, which thus reflects the company’s growth potential. Moreover, Iconix expects to deliver over 20% revenue and earnings per share growth for 2013.
Iconix reaffirmed its revenue guidance in the range of $425–$435 million. Free cash flow is expected in the range of $203–$210 million for 2013.
Guidance for 2014
Iconix also provided earnings and revenue guidance for 2014. The company expects revenues in the range of $440 million-$455 million. Adjusted earnings are expected in the range of $2.50-2.60 per share for 2014. Free cash flow is expected in the range of $210-$217 million.
Going forward, the company expects international expansion to boost organic growth for its brands. The company expects revenues from the non-consolidated joint ventures to be approximately $25 million for 2013 and $44 million for 2014.
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, having added the rest of Ecko and Marc Ecko Cut & Sew under its banner in May 2013.
In Feb 2013, Iconix acquired the renowned lifestyle brand Lee Cooper and 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 an iconic brand to its portfolio.
Iconix holds a Zacks Rank #3 (Hold). Other stocks in the consumer discretionary sector that are performing well and are therefore worth considering include Brown Shoe Co Inc (BWS) and Deckers Outdoor Corporation (DECK). While Brown Shoe holds a Zacks Rank #1 (Strong Buy), Deckers carries a Zacks Rank #2 (Buy).