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Why Is Inter Parfums (IPAR) Down 4.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Inter Parfums (IPAR - Free Report) . Shares have lost about 4.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Inter Parfums due for a breakout? 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 Q2 Earnings Top Estimates, Sales up Y/Y

Inter Parfums delivered second-quarter 2021 results, with the top and the bottom line increasing year over year. Earnings surpassed the Zacks Consensus Estimate and sales were in line with the same.

Management stated that sales growth was greater than its expectations and hence, the company’s promotion and advertising expenditures were relatively lower. Promotional and advertising expenses are anticipated to reach historical levels of 21% of net sales during 2021.

Quarter in Detail

Inter Parfums posted earnings per share of 71 cents, which easily surpassed the Zacks Consensus Estimate of 55 cents. The metric improved significantly from a loss of 10 cents per share reported in the year-ago quarter. Earnings also increased 82% from second-quarter 2019’s levels. This serves as a better base for comparison since second-quarter 2020 was majorly affected by the pandemic-led barriers. That being said, management highlighted that the bottom line was affected by some interest expenses as well as higher tax rate.

Net sales came in at $207.6 million, which increased significantly from $49.5 million reported in the year-ago quarter. The metric came in line with the Zacks Consensus Estimate. Net sales rallied 25% from second-quarter 2019’s levels.

In an earlier press release, the company highlighted that net sales of $207.6 million increased 22.7% on a constant-currency or cc basis from 2019 levels. Europe-based product sales increased 28.3% to $161.2 million, whereas U.S.-based product sales ascended 14.2% to $46.4 million from second-quarter 2019 levels.

In European operations, Montblanc, Jimmy Choo and Coach brands registered sales growth of 27.3%, 64.9% and 22.4%, respectively.  Apart from these, sales growth was backed by the initial sales of the Kate Spade signature collection, which marked its debut in the first quarter. In the U.S. operations, the jump in sales was majorly driven by the GUESS brand, which gained on continued legacy fragrance sales along with the new Bella Vita line. Contributions from the Abercrombie & Fitch brand and the launch of Oscar de la Renta’s Alibi also fueled sales growth.

Inter Parfums’ gross margin was 64%, up from 54% reported in the year-ago quarter. Compared with 2019 levels, the metric dropped mainly due to weak dollar and its effects on European operations. Gross margin for European operations was 67% down from 68% reported in the second quarter of 2019. In the U.S. operations, the metric came in at 53%, up from 52%

SG&A expenses amounted to $87.7 million, up from $32.4 million reported in the year-ago quarter. Operating income came in at $44.7 million, against an operating loss of $5.5 million reported in the year-ago quarter. In second-quarter 2019, the company posted operating income of $22.5 million. Further, operating margin was 22%, up from 14% reported in second-quarter 2019.

Other Financial Aspects

Inter Parfums ended the quarter with cash and cash equivalents of $149.7 million, long-term debt (excluding current portion) of $133.2 million and total equity of $727.5 million. Cash provided by operating activities amounted to $38.1 million for six months ended Jun 30, 2021. The company announced a quarterly dividend of 25 cents per share, to be paid out on Sep 30, 2021, to shareholders of record as of Sep 15.

Other Updates

Inter Parfums is on track to rollout products that were revealed in first half of the year. The launches include Alibi for Oscar de la Renta, Bella Vita for GUESS, I Want Choo for Jimmy Choo, Coach Sunset Dreams, the Kate Spade signature scent and Rochas Girl among others. The company is impressed with the performance of MCM genderfluid fragrance that was introduced in the first quarter. For the rest of the year the company’s new product pipeline is dominated by brand extensions like the Oscar de la Renta Bella family, flankers for Jimmy Choo Urban Hero and the Hollister Wave collection.  Recently, it debuted Effect, a full suite of men’s grooming and fragrance products, under the GUESS brand.

The company recently signed an agreement for the exclusive worldwide license for the manufacture and distribution of Ferragamo brand perfumes. Management expects the 10-year license to begin this October with a five-year optional term.

Guidance

The company reiterated its recently updated guidance for 2021. Based on year-to-date performance and current order levels for the second half of the year, management anticipates net sales of nearly $750 million for full-year 2021. Net income per share for the same period is envisioned to be $1.95. Management had earlier anticipated 2021 net sales to be nearly $700 million. Net income per share was expected to at $1.65. 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. The guidance does not include potential sales from the Ferragamo deal.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -23.94% due to these changes.

VGM Scores

Currently, Inter Parfums has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Inter Parfums has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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