Back to top

Growth & Income

Oxford Industries, Inc. (OXM - Snapshot Report) recently delivered its third consecutive positive earnings surprise on strong sales growth and margin expansion.

Management raised its guidance for the remainder of the year, prompting analysts to revise their estimates higher. This sent the stock to a Zacks #2 Rank (Buy).

Oxford offers exceptional growth potential and solid income. Based on consensus estimates, analysts project 80% EPS growth this year and 19% growth next year. Moreover, the company pays a dividend that yields 1.3%.

Company Description

Oxford Industries, Inc. is an apparel company with a portfolio of owned and licensed brands. Its main brand is Tommy Bahama®, but Oxford also holds licenses to produce and sell certain product categories under the Kenneth Cole®, Geoffrey Beene® and Dockers® labels.

The company is headquartered in Atlanta, Georgia and has a market cap of $663 million.

Second Quarter Results

Oxford Industries reported better than expected results for the second quarter on August 31. Earnings per share came in at 57 cents, beating the Zacks Consensus Estimate by 4 cents. It was a whopping 78% increase over the same quarter in 2010.

Net sales rose 26% to $180.6 million, ahead of the Zacks Consensus Estimate of $178.0 million. The Tommy Bahama segment, which accounted for 60% of net sales, saw top-line growth of 10%.

Despite fears of rising commodity prices squeezing margins at retailers, the gross margin actually increased 130 basis points to 57.0%. Meanwhile, selling, general and administrative expenses declined from 49.9% to 48.9% of net sales as the company leveraged its fixed expenses.

These factors led to a stellar 54% increase in operating profit as the operating margin increased from 8.5% to 10.4% of net sales.

Increased Guidance

Following better than expected second quarter results, management raised its guidance for the remainder of 2011. The company now expects EPS between $2.20 and $2.30, up from previous guidance of $2.15 to $2.25.

This prompted analysts to revise their estimates higher too, sending the stock to a Zacks #2 Rank (Buy). The Zacks Consensus Estimate for 2011 is now $2.26, which is within guidance. This corresponds with a remarkable 80% increase over 2010 EPS.

The 2012 consensus estimate also increased and currently stands at $2.70. This represents 19% growth over 2011 EPS.

Income

Oxford pays a dividend that yields 1.3%. The company cut its dividend in half back in 2009 but has raised it twice since then. It is currently 28% below its pre-recession levels.

Its payout ratio is relatively low at 25%, so as long as the company continues to grow its EPS, expect more dividend hikes on the horizon.

Valuation

Shares of OXM have held up relatively well during the recent market pullback. The stock trades at 16.4x forward earnings, a slight premium to the industry average of 13.9x. Given Oxford's higher than average expected growth rates, however, this premium seems more than justified.

Oxford's price to sales ratio is 0.9, which is in-line with the industry.

The Bottom Line

With exceptional growth projections, rising earnings estimates, a solid dividend and reasonable valuation, Oxford Industries offers plenty to like.

Read the June 23 article here.

This Week's Growth & Income Zacks Rank Buy Stocks:

RPC, Inc. (RES) delivered excellent results for the second quarter of 2011. Analysts have been steadily increasing their earnings estimates over the last several quarter and are projecting 115% EPS growth this year and 24% growth next year. The company also pays a dividend that yields a solid 1.4%. Valuation is attractive too, with shares trading well below their historical median. Read the full article.

Chico's FAS, Inc. (CHS) has managed to generate exceptionally strong sales growth in a difficult retail environment. Same-store sales rose an incredible 12.8% in the second quarter of 2011, for instance. Analysts are currently projecting 38% EPS growth this year and 18% growth next year. The company also pays a dividend that yields 1.5%. Valuation is attractive too, with shares trading well below their historical averages. Read the full article.

Schlumberger Limited (SLB) reported better-than-expected second quarter results, prompting management to give a bullish outlook for the rest of 2011. Analysts raised their estimates significantly higher for both 2011 and 2012, sending the stock to a Zacks #2 Rank (Buy). The company also pays a dividend that yields 1.4%. Read the full article.

The Hershey Company (HSY) recently reported better-than-expected second quarter results as both sales volumes and prices increased year-over-year. Management raised its EPS guidance for the remainder of the year, prompting analysts to revise their estimates higher. It is a Zacks #2 Rank (Buy). The company also pays a dividend that yields a stellar 2.4%. Read the full article.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
QIHOO 360 T… QIHU 95.04 +4.95%
PILGRIM'S P… PPC 31.52 +3.72%
CLAYTON WIL… CWEI 138.97 +3.55%
CALLON PETE… CPE 11.50 +3.14%
ACTELION LT… ALIOF 124.80 +2.97%