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Inter Parfums (IPAR) Up 10.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Inter Parfums (IPAR - Free Report) . Shares have added about 10.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Inter Parfums due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Inter Parfums Q1 Earnings Top Estimates, Increase Y/Y

Inter Parfums, delivered solid first-quarter 2021 results, Management stated that sales growth was greater than its expectations and hence, the company’s promotion and advertising expenditures were relatively lower. The company further stated that it expects SG&A expenses to normalize as Inter Parfums resumes more activities. Promotional and advertising expenses are especially anticipated to reach historical levels of 21% of net sales.

Well, Inter Parfums’ business has been particularly sturdy in regions where lockdowns have been eased, stores have reopened and activities have reverted to the old normal, especially in Asia and North America. On the contrary, Western Europe continues to grapple with pandemic-led closures and limitations associated with the third wave. Meanwhile, the company saw revivals in the Middle East, Eastern Europe, and Central and South America. Certainly, Inter Parfums has been focused on augmenting growth and exploring potential license deals with different brands in this respect.

Inter Parfums posted earnings per share of 87 cents, which easily surpassed the Zacks Consensus Estimate of 63 cents. Moreover, the metric increased significantly from 32 cents per share reported in the year-ago quarter. Net sales surged 37.1% to $198.5 million compared with $144.8 million recorded in the year-ago period. The Zacks Consensus Estimate stood at $198 million. At comparable exchange rates, consolidated net sales advanced 32.7%. During the quarter, European product sales surged 40% to $159.7 million and U.S.-based product sales grew 26.2% to $38.8 million from the year-ago period.  

In European operations, Montblanc, Jimmy Choo, Coach and Lanvin brands registered sales growth of 27.4%, 66.7%, 8.8% and 91.2%, respectively. Sales at Montblanc and Lanvin brands were backed by strength in legacy scents, with the latter seeing solid growth in key markets — Asia and Eastern Europe. Sales growth at the Coach brand resulted from favorable currency movements as well as higher sales volumes. Jimmy Choo sales were aided by robust sales of established Jimmy Choo scents, together with the successful launch of I Want Choo in the quarter under review. Apart from these, impressive initial sales of Kate Spade New York and Rochas Girl backed first-quarter sales.

Moving to the U.S. operations, which also recorded robust growth in the quarter under review, the company’s largest brand, GUESS, continued gaining on legacy fragrance sales as well as the initial distribution of Bella Vita. Moreover, solid replenishment orders for Abercrombie & Fitch’s Authentic Night duo, which debuted last year, aided growth. Sales of the Hollister brand were led by Canyon Escape duo shipments. Additionally, the Dunhill brand delivered a strong show, thanks to its new signature scent. The debut of the MCM signature scent toward the end of the first quarter also led to the upside. We note that the global rollout of the product is now underway. In U.S. operations, the Anna Sui brand witnessed a sequential sales decline, as the launch of Sky in the fourth quarter of 2020 largely boosted sales in that quarter. Also, Anna Sui sales were hurt by the soft travel retail/duty-free market. Nonetheless, the company has considerable Anna Sui open orders and remains well placed for improved sales in the brand as the year proceeds.

Inter Parfums’ gross margin was 63.1%, up 160 basis points from 61.5% posted in the year-ago quarter. SG&A expenses amounted to $74.9 million, up from $71.3 million reported in the year-ago quarter. Operating income came in at $48 million, up significantly from $17.8 million reported in the year-ago quarter. Further, operating margin was 24%, up from the year-ago quarter’s 12%.

Other Financial Aspects & Guidance

The company ended the quarter with cash and cash equivalents of $143.3 million, long-term debt (excluding current portion) of $9.2 million and shareholder’s equity of $540.1 million. Cash provided by operating activities amounted to $32.5 million during the first quarter of 2021. The company announced a quarterly dividend of 25 cents per share, to be paid out on Jun 30, 2021, to shareholders of record as of Jun 15.

The company reiterated its recently updated guidance for 2021. Management anticipates 2021 net sales to be nearly $700 million, while net income per share is expected to be $1.65. We note that the latest view is based on the assumption of no major resurgence in coronavirus cases and the current level of the average dollar/euro exchange rate.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted 13.54% due to these changes.

VGM Scores

At this time, Inter Parfums has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Inter Parfums has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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