Williams-Sonoma Inc. (WSM - Snapshot Report) has been consistently delivering positive earnings surprises for the past four years. Keeping with this trend, this specialty retailer of home products reported solid fiscal first-quarter 2012 earnings that beat the Zacks Consensus Estimate by 6.3% on a 5.4% increase in same-store sales. The companys continued investments in its long-term strategic growth initiatives should boost results going forward.
This Zacks #2 Rank (Buy) is also focused on enhancing shareholder value through share repurchases, and has a solid 2.5% dividend yield.
Fiscal 2012 First-Quarter Results
On May 22, Williams-Sonoma reported fiscal first-quarter 2012 earnings per share of 34 cents, beating the Zacks Consensus Estimate of 32 cents. This represented a 13% rise over the previous year.
Net revenues rose 6.1% to $818 million, driven by a 5.4% increase in same-store sales. The West Elm brand witnessed a 22.1% increase in same-store sales while the Pottery Barn brand rose 9.1%. This more than offset the decline in its other brands, including the Williams-Sonoma brand (down 3.2%), Pottery Barn Kids (down 0.8%) and PBteen (down 6.0%).
Meanwhile, operating income increased 6% as the operating margin held steady at 6.9%.
Management provided encouraging guidance in its fiscal 2012 first-quarter press release. The company expects to earn between $2.42 and $2.49 in 2012 on 4%-6% revenue growth.
Estimates on the Rise
In the last 60 days, the Zacks Consensus Estimate for fiscal 2012 has moved up 1.6% to $2.49, representing 11.2% growth over 2011. The fiscal 2013 estimate is currently $2.76, up 1.5% in the last 60 days and implying year-over-year growth of 10.8%.
In addition to steady growth, Williams-Sonoma pays a solid dividend. Since 2006, the company has increased its dividend 6 times at a compound annual rate of 14%. Currently, it pays a quarterly dividend of 22 cents that yields a solid 2.5%, while the payout ratio comes to 35.0%. The average five-year yield stands at 2.9%.
Valuation looks reasonable for this specialty retailer with shares trading at 14.5x 12-month forward earnings, on par with its peer group average. However, on a price-to-book basis, shares are currently trading at 2.95x, a 50.5% premium to the peer group average of 1.96x.
Nevertheless, the stock also looks attractive given a trailing 12-month ROE of 19.4%, which is higher than the peer group average of 14.4%. The companys long-term estimated earnings per share growth rate also remain strong at 13.1%.
Chart Shows Promise
The stock proves attractive for investors on grounds of encouraging earnings growth forecasts, a history of positive earnings surprises and the ability to sustain dividend increases. At a glance, the price and consensus chart shows that the stock price line is clearly below the fiscal 2012 and 2013 earnings estimate lines, indicating that the stock is still undervalued.
Moreover, the historical trends demonstrate that the stock has followed the growth in earnings estimates since the start of 2010. This suggests that if the earnings estimates move further up, the stock price is likely to follow along.
With a solid start to fiscal 2012 and its growth strategies in place, Williams-Sonoma remains fully poised to deliver strong earnings growth through the rest of the year. The opening trends in the second quarter point to incredibly positive customer response to the companys core and seasonal merchandise assortments, which are likely to continue going forward.
Founded in 1956 and headquartered in San Francisco, California, Williams-Sonoma is a specialty retailer of high-quality products for the home. The company sells its products under seven brands, each representing a distinct merchandise strategy. It deals in cookware, furniture including modern and luxury, kids furniture, wedding registry, bridal registry, baby registry, girls and boys bedding, room decor, decorative accessories, lighting and hardware. The companys brands include Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm, Williams-Sonoma Home and Rejuvenation. The company has 575 stores throughout North America.
This Week's Growth & Income Zacks Rank Buy Stocks
With a juicy distribution yield of 5.9%, a business model focused on operational efficiencies and attractive acquisitions/growth projects, Genesis Energy L.P. (GEL) provides investors with a steady, predictable income stream. In addition, this Zacks #1 Rank (Strong Buy) diversified midstream energy operator has raised its quarterly payout 28 times in a row. On top of this, earnings growth is expected to be strong in 2012 and 2013 based on the solid fixed margin businesses and limited commodity price exposure. Read the full article.
URS Corporation (URS) reported solid first quarter results on May 9th, beating the Zacks Consensus Estimate in both earnings and revenue. As a result, analysts made significant upward revisions to their estimates for fiscal years 2012 and 2013, helping the stock achieve a Zacks #2 Rank (Buy). In addition, since last March, this engineering and construction service provider has started paying a quarterly dividend that affirms a yield of 2.3%. Read the full article.
Shares of Avalonbay Communities Inc. (AVB) have been on a long-term uptrend since mid-2010, barring volatility during late 2011 when the industry was marred by incessant fears of a double-dip recession. The stock is currently trading at a 52-week high of $149.05. With a decent dividend yield of 2.6%, this apartment REIT (real estate investment trust) promises to be a solid pick for investors seeking both growth and income. Read the full article.
Teekay LNG Partners LP (TGP) has gained 23.3% since December 2011 thanks in large part to the growing global demand for liquefied natural gas (LNG) as a substitute for coal and oil. Other factors for the advance include a decrease in the construction costs for LNG vessels and a significant increase in distributable cash flow through successful acquisitions. Furthermore, this LNG vessels operator currently enjoys an attractive dividend yield of 6.8%. Read the full article.