Iconix Brand Group, Inc. (ICON - Analyst Report) posted second quarter 2013 adjusted earnings of 72 cents per share, surpassing the Zacks Consensus Estimate of 56 cents by 28.6% and the year-ago earnings of 45 cents by 60%. The upswing in earnings can be attributed to solid revenues, strategic acquisitions and lower share count owing to share buyback.
Quarter in Detail
Total revenue in the quarter surged 23% year over year to $115.1 million. The solid results were driven by the company’s strong brand portfolio, recent acquisitions and continued focus on international expansion, which includes the new joint venture in Canada. Revenues surpassed the Zacks Consensus Estimate of $112 million.
The formation of this new joint venture in Canada contributed approximately $9.8 million to current quarter revenues. Similarly, the last quarter included the formation of the company’s joint venture in India, which contributed approximately $5.6 million to revenues.
On a year-over-year basis, earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 24.0% to $72.7 million in the second quarter.
Iconix exited the quarter with free cash flow of $60.8 million compared with $51.8 million at the end of the first quarter of 2013.
In the second quarter, Iconix bought back 5.2 million shares at an average price of $25.42. The company now has $53 million remaining under the previous $300 million stock repurchase program, which was approved by the company’s board in Feb 2013.
Since initiating the share repurchase program in Oct 2011, the company has repurchased approximately $447 million of its stock. During the quarter, Iconix’s board authorized a new share repurchase program to repurchase up to $300 million shares over a three-year period.
Following the solid second quarter 2013 earnings, Iconix raised its 2013 adjusted earnings guidance to $2.20–$2.30 per share from the previously announced range of $2.10–$2.20 per share. The company has been raising its guidance since the last two quarters to reflect the ongoing acquisitions of the company. Moreover, Iconix expects to deliver over 20% revenue and earnings per share growth for 2013.
Iconix reaffirmed its revenue guidance in the range of $425–$435 million. Free cash flow is expected in the range of $203 millon–$210 million for 2013.
Iconix’s overall growth story looks compelling. This clothing brand licensing company has been aggressively acquiring brands and entering into joint ventures to expand its portfolio, having added the rest of Ecko and Marc Ecko Cut & Sew under its banner in May 2013. In late-Feb 2013, Iconix acquired the renowned lifestyle brand Lee Cooper and earlier in the same month, formed a joint venture with Buffalo International ULC to acquire a 51% interest in the latter’s Buffalo David Bitton brand. The acquisition of the renowned football brand Umbro from Nike, Inc. (NKE - Analyst Report) in early-Dec 2012 added an iconic brand to its portfolio.
Iconix holds a Zacks Rank #3 (Hold). Other stocks in the consumer discretionary sector that are performing well and are therefore worth considering include Brown Shoe Co Inc and Rocky Brands Inc (RCKY - Snapshot Report) , both of them holding a Zacks Rank #1 (Strong Buy).