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Outdoor Channel Holdings

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Outdoor Channel Holdings, Inc. (OUTD) reported a 100% positive earnings surprise in its second quarter of 2012. Currently, this Zacks #1 Rank (Strong Buy) entertainment and media stock is hovering close to its 52-week high of $7.99.

Break-even Q2 Result

On August 7, Outdoor Channel Holdings reported break-even second quarter earnings per share, which compared favorably with a loss of 3 cents in the prior-year quarter and with the Zacks Consensus Estimate for a loss of 5 cents. Top-line growth and operational efficiencies across business segments led to the encouraging result.

Total revenue of $16.3 million surpassed the Zacks Consensus Estimate of $15 million and rose 12% year-over-year, mirroring revenue increases in segments such as The Outdoor Channel (up 14.7%) and Aerial Cameras (up 5%). However, revenue at the Production Services unit dropped 11.6%. Loss from operations improved to $89,000 from $1.6 million in the year-ago quarter.

Earnings Momentum Climbing

The Zacks Consensus Estimate for 2012 rose 30% to 13 cents per share over the last 60 days, implying year-over-year growth of 85.7%. For 2013, the Zacks Consensus Estimate is 18 cents per share, increasing approximately 12.5% over the same time frame and marking year-over-year growth of 38.5%.

Premium Valuation

Outdoor Channel Holdings currently trades at a forward P/E of 55.69x, reflecting a 63.6% premium to the peer group average of 34.04x. Also, on a price-to-book basis, shares trade at 1.40x, a 23.9% premium to the peer group average of 1.13x. Again its price-to-sales ratio of 2.56 is at a substantial premium to the peer group average of 0.58.

A Look at the Chart

The 12-month EPS chart below indicates that after witnessing volatility in the past, the stock price has now started to correlate with the increasing trend in estimates. The current momentum appears to be driven by better-than-expected second-quarter 2012 results. Currently, the stock price is in the range of $7.00–$7.50, and the consensus estimates for 2012 and 2013 are steadily moving upward.

Founded in 1984 and headquartered in Temecula, California, Outdoor Channel Holdings, Inc. is an entertainment and media company in the United States, and reports under three segments: The Outdoor Channel, Production Services and Aerial Cameras. The Outdoor Channel division operates Outdoor Channel and, and offers programming on different traditional outdoor activities, such as hunting, fishing, shooting sports, off-road motorsports and others. The Production Services unit is primarily involved in the production, development and marketing of sports programming. The Aerial Cameras division offers suspended aerial camera services to media networks. Outdoor Channel Holdings, which competes with Discovery Communications, Inc. (DISCA), currently has a market cap of $182.3 million.

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