Zacks Investment Research upgraded Iconix Brand Group, Inc (ICON) to a Zacks Rank #1 (Strong Buy) on Jul 27 on the back of impressive second quarter 2013 results and an enhanced guidance for the year.
Why the Upgrade?
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 this new joint venture in Canada contributed approximately $9.8 million to current quarter revenues.
Both earnings and revenues surpassed the Zacks Consensus Estimate. In fact, Iconix has beaten the Zacks Consensus Estimate in the past four quarters with an average earnings surprise of 11.21%.
Iconix also bought back 5.2 million shares in the second quarter. During the quarter, Iconix’s board authorized a new share repurchase program to repurchase up to $300 million shares over a three-year period.
Following solid second quarter 2013 results, Iconix raised its 2013 adjusted earnings guidance 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 in its 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.
Estimates have mostly increased after the strong second quarter results and upbeat outlook for the year. The Zacks Consensus Estimate increased 6.0% to $2.30 per share for 2013, while it grew 2.5% to $2.43 per share for 2014 over the past 7 days.
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 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 early-Dec 2012 added another iconic brand to its portfolio.
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