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Inter Parfums, Inc. (IPAR - Free Report) recently reported solid fourth quarter results, beating the Zacks Consensus Estimate for the third straight quarter. Analysts have been consistently raising their estimates over the last several months as the global economy recovers, sending the stock to a Zacks #2 Rank (Buy).

The company has a solid balance sheet and few capital expenditure requirements, which has allowed it to steadily raise its dividend over the last several years. It currently yields 1.8%.

Fourth Quarter Results

On March 8, Inter Parfums reported its results for the fourth quarter of 2010. Earnings per share came in at 20 cents, beating the Zacks Consensus Estimate by a penny. It was an 11% increase over the same quarter in 2010.

Net sales were up 6% on a comparable currency basis. Sales by U.S.-based operations were up 2% while European-based operations dipped slightly.

The gross margin expanded from 56.1% of sales to 59.0% in the quarter due to a favorable product mix. This was more than offset, however, by higher selling, general and administrative expenses, which rose from 42% of sales to 48%. This caused the operating margin to contract from 12.2% of sales to 11.0%.

Strong Growth Ahead

Management expects 2011 to be another year of solid growth for the company. The company gave sales guidance of $525.0 million, which equates to 14.0% growth over 2010. It also expects earnings of 98 cents per share, which represents 12.6% annual growth. The Zacks Consensus Estimate is slightly above guidance at 99 cents.

The Zacks Consensus Estimate for 2012 is currently $1.15, representing 17% growth over 2011 EPS.

Analysts have been steadily raising their estimates for 2011 and 2012 as the global economy recovers and IPAR has delivered three consecutive positive earnings surprises. This can be seen in the company's Price & Consensus chart:

IPAR: Inter Parfums, Inc.

It is a Zacks #2 Rank (Buy).

Solid Fundamentals

The company has approximately $87 million in cash and short-term investments on its balance sheet and just $5 million in long-term debt.

Inter Parfums is not a capital intensive business. Rather than owning its own manufacturing facilities, the company acts as a general contractor, working with various suppliers and manufacturers to finish its goods. As a result, the company generates strong free cash flow and has been rewarding its shareholders through dividend increases.

On March 8, for instance, the company announced that it was increasing its quarterly dividend by 23%. This marks the company's sixth dividend hike since 2003. It yields 1.8%.

Valuation is reasonable with shares trading at a price to book ratio of 1.8, below the industry average of 2.7.

Its forward P/E ratio of 17.8 is a premium to the peer group at 15.6, but its PEG ratio is a very reasonable 1.3.

About the Business

Inter Parfums produces and distributes perfumes and cosmetics. It distributes its prestige fragrance products primarily under license agreements with brand owners and through specialty retailers.

Under license agreements, Inter Parfums obtains the right to use the brand name, create new fragrances and packaging, determine positioning and distribution, and market and sell the licensed products, in exchange for the payment of royalties.

The company has built a portfolio of brands, but its most significant license is Burberry, which represents 53% of net sales.

Inter Parfums is a global company with 46% of sales coming from Europe, 20% from North America, 14% from Asia, 10% from the Middle East, and 9% from Central and South America.

Together, co-founders Jean Madar and Philippe Benacin own nearly 50% of the company. It is headquartered in New York City and has a market cap of $536 million.

Read the February 9 article here.

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Todd Bunton is the Growth & Income Stock Strategist for

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