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Rising earnings estimates on the back of strong second quarter results – including an 85.7% earnings surprise – helped G III Apparel Group Inc. ( GIII - Snapshot Report ) achieve a Zacks #1 Rank (Strong Buy) on September 11, 2012. This apparel manufacturer has delivered positive earnings surprises in two of the last four quarters, and met the estimates in one, with an average beat of 24.3%.
With a solid year-to-date return of 44.5% and a history of beating quarterly earnings estimates, this stock offers an attractive investment opportunity.
The Rank Driver
Better-than-expected second quarter earnings of fiscal 2013, robust sales growth year-to-date, acquisition of the leading luxury resort brand, Vilebrequin, and a raised fiscal 2013 outlook – are the primary rank drivers for this stock.
G III Apparel reported its second quarter 2013 results on September 5, 2012, with earnings per share of 13 cents, beating the Zacks Consensus Estimate of 7 cents by 85.7% and year-ago earnings of 9 cents by 44.4%. Additionally, the quarterly earnings per share came ahead of the company’s guided range of 4 cents to 8 cents.
Net sales surged 16.5% and 9.4% year over year to $229.4 million and $251.5 million, in the first and second quarter of fiscal 2013, respectively. The increase in net sales is driven by significant comps growth of 6.3% and 12.7% in first and second quarter of 2013 in dresses, sportswear, suits, handbags, team sports and specialty retail operations.
On August 7, 2012, GIII Apparel acquired a leading luxury resort brand, Vilebrequin at a consideration of about $106.2 million. Management believes that this merger will prove to be accretive to the company’s top line as the brand operates a high operating margin business.
Based on strong second quarter results, the company raised its outlook for fiscal 2013. G-III now anticipates earnings per share between $2.68 and $2.78, up from the previously forecasted range of $2.62 to $2.72. Net sales are now expected to be $1.41 billion, versus the earlier projection of $1.35 billion. On an adjusted basis, the company expects earnings per share in the range of $2.74 – $2.84.
Earnings Estimate Revisions
The Zacks Consensus Estimate for fiscal 2013 increased 4.4% to $2.83 per share based on 5 out of 5 upward estimate revisions over the last 30 days. The current estimate implies a year-over-year growth of 14.9%.
For fiscal 2014, 5 out of 6 estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 4.5% to $3.22 per share.
G-III Apparel currently trades at a forward P/E of 12.68x, reflecting a 31.3% discount to the peer group average of 18.45x. On a price-to-book basis, shares trade with a 12.1% discount at 1.97x. The company’s compelling fundamentals are well supported by its long-term estimated EPS growth rate of 20.0% versus 13.7% for the peer group.
The company has a trailing 12-month ROE of 14.0%, above the peer group average of 11.8%. This implies that the company reinvests its earnings more efficiently than its peer group.
About the Company
Based in New York, G-III Apparel Group is a leading designer and distributor of women’s and men’s apparel in the United States. The company deals in outerwear, dresses, sportswear, swimwear, beachwear and women's suits, as well as handbags and luggage. The company has a market capitalization of about $717.9 million.
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