Iconix Brand Group, Inc.
(ICON - Analyst Report
) saw record revenue in the first quarter as its collection of brands saw strong growth, including internationally. Even with shares near a 10-year high, this Zacks #1 Rank (strong buy) still has attractive valuations, with a forward P/E of 14.3.
Iconix Brand Group was formerly Candie's but changed its name to acknowledge the wealth of consumer brands the company now owns and licenses to major retailers and manufacturers.
Those include, of course, Candie's, but also Badgley Mischka, Joe Boxer, Rampage, Mudd, London Fog, Mossimo, Danskin, Roca Wear, Cannon, Royal Velvet, Fieldcrest, Charisma, Starter and Waverly.
The company also owns an interest in the Artful Dodger, Marc Ecko, Zoo York, Material Girl and Peanuts.
Acquired More of the Ed Hardy Brand
On Apr 27, Iconix Brand announced it acquired the worldwide master license for the Ed Hardy brand for $55 million plus $7 million earn-out from Nervous Tattoo.
Nervous Tattoo will continue as a licensee for Ed Hardy T-shirts, hats and hoodies. This acquisition increased its total ownership stake in the Ed Hardy brand to 85%.
The company had previously had a small investment in the brand through a joint venture with Don Ed Hardy, the artist who is known as the "godfather of the modern tattoo."
Iconix Brand estimated that the Ed Hardy brand will generate total annual royalty revenue between $15 and $16 million.
Iconix Brand Has a Record First Quarter
On Apr 27, Iconix Brand reported its first quarter results and beat the Zacks Consensus Estimate by 9.8%. It was the 5th consecutive earnings beat.
Earnings per share were a record 45 cents compared to the consensus of 41 cents. It made just 36 cents in the year ago quarter.
Revenue soared 29% to a record $92.4 million from $71.7 million in the first quarter of 2010.
All of its brands showed strength but it was especially strong in the direct-to-retail brands, which continued to gain shelf space. International sales also expanded as its partners opened up hundreds of stores in China.
Raised 2011 Guidance
Given the beat and the Ed Hardy acquisition, which will definitely impact revenue, the company raised both its revenue and EPS guidance for 2011.
Revenue is now expected between $355 - $365 million, up from the prior guidance of $340 to $350 million.
Earnings per share jumped to the range of $1.50 to $1.55 from $1.40 to $1.45.
Analysts are even more bullish, as the Zacks Consensus has risen to $1.66 from $1.54 in the last 2 months.
That is earnings growth of 15%.
Shares Near 10-Year High
The record quarter was icing on the cake for shareholders, who have been celebrating a stock trading around 10 year highs for the past several months.
But even with the shares at such elevated levels, earnings have been keeping the pace which results in a stock that still has attractive valuations.
In addition to a P/E under 15, which is what I use to determine a "value" stock, Iconix Brand has a price-to-book ratio of only 1.5. A P/B ratio under 3.0 is what I use to determine value.
Additionally, the company has a solid return on equity (ROE) of 10.2%.
There is growth in consumer brands, especially overseas, as consumers are opening their wallets now that the global economy is recovering. With double digit earnings growth expected in 2011, and cheap value metrics, Iconix Brand is an attractive value stock.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.