Beauty Holdings Inc. (SBH)
While the most
recent economic data and market action may not be pretty, Sally Beauty
to deliver some very attractive results on May 3rd.
The global beauty
supplier reported same store sales growth of 9.1% in Q2 2012 compared
to 6% in
the same quarter last year. Net sales
were up 10.9% to $889.3 million, which equated to Q2 net earnings of
million or 35 cents per share, an increase of 34.6% compared to Q2 2011.
Sally finds itself
in an unusual situation. They seem to be
the only bright light in a sector that has been struggling as of late.
Could it be that they have simply gotten lucky up
until now or are they really capturing that much business and executing
better than their peers?
Description & Financial
Sally Beauty Holdings, Inc. is an international specialty retailer and
distributor of professional beauty supplies.
Through the Sally Beauty Supply and Beauty Systems Group businesses,
sells and distributes more than 6,000 products for hair, skin, and
through professional lines such as Clairol, L'Oreal, Wella and Conair,
as an extensive selection of proprietary merchandise.
Sally operates over 4,300 stores (including 200 franchised
units) throughout the U.S.,
U.K., Belgium, Chile, France, Canada, Puerto Rico, Mexico, Ireland,
Netherlands, Spain and Germany. Their Beauty Systems Group is the
beauty supplier in the world catering to professionals through a
stores and sales consultants. The Beauty Systems arm
of SBH sells up to 9,800 professionally branded products including Paul
Mitchell, Wella, Sebastian, Goldwell, and TIGI which are targeted
for professional and salon use and resale to their customers.
SBH is mid-cap (4.95 billion) company with
annual revenues of roughly $3.3 billion.
The stock is trading at 19.5 times forward earnings with a PEG ratio of
1.21. This puts Sally Beauty at a bit of
a premium compared to the broad market, but perhaps justified given its
SBH does not offer a dividend at this time.
Sally became a Zacks Rank 1, Strong Buy on May
They reported a quarter over quarter
sales increase of 3% at their last earnings report, but managed to
register a 21%
EPS gain in the same period. Their bottom line has topped analyst
the last four quarters, exceeding the Zacks Consensus EPS Estimate by
average of 7.91% during that time.
is expected to earn $1.36 in
FY2012 and $1.59 in FY2013 according to the Zacks Consensus Estimate.
Of the 8 analysts who cover SBH, the
consensus is for the company to see a 27.% increase in EPS in the
(FY2012) and grow earnings by 17% in FY2013.
terms of the magnitude of analyst
estimate trends, we are seeing all of the consensus estimates higher
were 7 days ago for the current and next quarter as well as FY2012 and
FY2013. These upward revisions came in the wake of the
strong earnings and guidance gleaned from their recent report.
is expected to earn 38 cents
when they report on August 9th.
Market Performance &
SBH epitomizes the word momentum. What
is most amazing about this stock is the fact that it has continuously
since July of 2010. Even the downdrafts in
August 2011 which sent SBH below $15 still didn’t push the stock below
day moving average, which now stands all the way down at $20.66
the 20 day at $26.14 provides
some support here, I would look towards the 50 day average of $25.35
for a more
viable support level.
has exceeded the S&P 500’s
performance by a staggering 66% in the past year and almost 14% in the
months. Even with the recent pullback,
Sally Beauty still leads the S&P 500 by almost 7% in
the last 30 days alone. Even
though SBH has shown stunning performance for almost 2 years now,
it is susceptible to market corrections and will generally be more
given its Beta of 1.67.
A Levy is the
Momentum Stock Strategist for Zacks.com. He is also the Editor in
charge of the
Whisper Trader Service.