Collective Brands, Inc.
) is riding high on the announcement of its merger with a group of buyers, including footwear giant Wolverine World Wide, Inc. (WWW
), in a deal valued at around $2 billion, including debt. Moreover the company has beaten the Zacks Consensus Estimate for four straight quarters with an average earnings surprise of 34.4%.
Shares of this leading lifestyle footwear and accessories brand company reached a new 52-week high of $21.41 on May 9, just a few days after the announcement of the merger. The stock became a Zacks #1 Rank (Strong Buy) on May 25, 2012 after solid first quarter results.
Solid First Quarter Results
On May 22,, Collective Brands reported fiscal first quarter (ended April 2012) adjusted earnings of 68 cents per share, which easily surpassed the Zacks Consensus Estimate of 46 cents by nearly 48%. Moreover earnings were up a sharp 62% from last years 42 cents driven by solid top-line growth.
Over the past seven quarters, Collective Brands has surpassed estimates six times, while missing once.
Total net sales during the quarter grew 5% year over year to $912.1 million, which breezed past the Zacks Consensus Estimate of $885.0 million. Collective Brands consolidated same-store sales increased 8.1% in the quarter.
The top line was helped by strong same store sales at Payless ShoeSource in North America and overall growth at PLG, both retail and wholesale. The companys strategic redirection of the Payless domestic business is bearing fruit, as the segment reporting sales and profit growth despite operating fewer stores in the quarter. The PLG Retail segment did well due to strong comparable store sales growth and contribution from the new Sperry stores.
Estimates Going Up
Three out of four estimates for fiscal 2012 have moved up over the past 30 days, sending the Zacks Consensus Estimate higher by 23.6% to $1.36 As for fiscal 2013, the Zacks Consensus Estimate has gained 12.8% to $1.68 in that time.
Overall, an Attractive Valuation
Collective Brands currently trades at a forward price-to-equity (P/E) of 15.59x, reflecting an 8.6% premium to the peer group average of 14.35x. However, on a price-to-sales basis, the shares trade at 0.37x, a 57.5% discount to the peer group average of 0.87. On a price-to-book (P/B) basis as well, the stock looks attractive. The P/B multiple of the stock is approximately 1.81 versus 2.16 for the peer group.
Chart Echoing Strength
Shares of Collective Brands have been trading close to its proposed acquisition price of $21.75 since the announcement of the merger. Moreover, the stock is currently above its 50 and 200-day moving averages, which stand at $20.40 and $16.33, respectively. In fact, the stock has been consistently trading above its 200-day moving average since January 23, 2012. Also, it has remained above the 50-day moving average since January 17, 2012.
Volume is fairly strong, averaging roughly 1759K daily. Collective Brands has outperformed the S&P 500 over the past six months. The year-to-date return for the stock is 47.81% compared with the S&P 500s return of 4.57%.
Based in Topeka, Kansas, Collective Brands markets a portfolio of footwear and related accessories brands through its three strategic units Payless ShoeSource, Collective Brands Performance + Lifestyle Group (PLG) and Collective Licensing International. The company reports its business in four segments: Payless Domestic, Payless International, PLG Wholesale and PLG Retail. The market cap of the company is $1.29 billion.
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