Black Diamond, Inc.
) has delivered three straight positive earnings surprises, including a 140% beat in the most recent quarter. The company is expected to report a narrower loss than last year in its second quarter earnings release on August 8. Shares of this Zacks #1 Rank (Strong Buy) outdoor equipment maker should continue to show momentum with the help of its steady results and the strategic acquisition of POC Sweden.
Acquisitions and Earnings
Black Diamond completed the acquisition of sports gear maker POC Sweden AB on July 2. The acquisition is a strategic fit for the company as POC is a fast-growing brand globally with healthy margins and 35% growth in the prior fiscal year. The acquisition is expected to be accretive to the companys bottom line in 2013. The deal is also consistent with the companys strategy of expanding through acquisitions. Management expects to generate $500 million in sales by 2015, with $250 million coming from acquisitions.
On May 7, Black Diamond reported first quarter 2012 earnings of 12 cents per share, beating the Zacks Consensus Estimate and the year-ago quarter earnings by 140%. Total revenue climbed 19% year over year to $46.4 million and was also above the Zacks Consensus Estimate of $44.0 million. The double-digit top-line growth was driven by both innovative and existing products.
Gross margin expanded 150 basis points (bps) year over year to 40.1%, benefiting from the shift to higher-margin products. Total operating expense jumped 6% to $13.9 million during the quarter due to continued investments in infrastructure improvements and the upcoming apparel line in 2013. Despite higher expense, operating margin enhanced 320 bps to 10.2%.
For fiscal 2012, the company expects sales pre-POC to range between $160 million and $165 million, indicating 10% to 13% growth.
Earnings Estimates on the Rise
The Zacks Consensus Estimate for 2012 has risen by 67% to 10 cents per share over the last 90 days. For 2013, the Zacks Consensus Estimate climbed 23% to 16 cents per share over the same timeframe. The estimate for 2013 represents a year-over-year increase of approximately 59.42%.
Though the stock of Black Diamond is expensive on a P/E basis, it looks reasonable from a book value perspective. On a trailing twelve months P/E basis, shares are trading at a P/E of 33.58x, versus the industry average of 13.28x. On a price-to-book basis, shares currently trade at 1.34x, a 47% discount to the industry average of 2.53x. The company's long-term EPS growth projection of 17.5% is also higher than the industry average of 14.0%.
Since mid-January, Black Diamond stock remained above its 200 day moving average, which currently stands at $8.64 against the current unit price of $10.41. Moreover, since June 29, the stock is trading above its 50-day moving average. On the performance front, Black Diamond has outperformed the S&P 500 year-to-date and has delivered a return of 39.4% during the period, versus just 9.5% for the benchmark. Black Diamond is currently trading around its 52-week high of $10.63.
Located in Salt Lake City, Utah, Black Diamond manufactures outdoor products for climbing, mountaineering, backpacking, skiing and other year-round activities. The company owns the Black Diamond and Gregory brands and remains committed to growth through acquisitions in the long term. With a market capitalization of $319.4 million, Black Diamond primarily competes with Pool Corp. (POOL) and Columbia Sportswear Company (COLM).