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Inter Parfums (IPAR) Down 9.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Inter Parfums (IPAR - Free Report) . Shares have lost about 9.8% 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 Misses on Q3 Earnings, Raises View

Inter Parfums, Inc. delivered lower than-expected earnings when it reported third-quarter 2019 results. Nevertheless, the top and the bottom line rose year on year. Sturdy brand performances across the European and U.S. operations fueled results. Further, the company raised its earnings view for 2019 and authorized a hike in quarterly dividend rate.

Consistent growth across the company’s operational segments, backed by the presence of strong brands has been working in favor of stock.

Quarter in Details

The company posted earnings per share of 66 cents, which fell short of the Zacks Consensus Estimate by a penny. The bottom line rose 10% year on year.

Net sales for the quarter amounted to $191.23 million, up 7.9% on a year-over-year basis. At comparable currency exchange rates, net sales improved 9.7%. Growth across the European and U.S. operations boosted sales in the reported quarter.

In U.S. based operations, net sales increased 20.7% to $47.6 million. The GUESS?brand continues to be one of the key growth catalysts in this unit. Other brand banners depicting growth include The Oscar de La Renta, Abercrombie & Fitch, Hollister and Anna Sui.  

Net sales in the European-based operations amounted to $143.6, up 4.2% year on year. Strong growth across brands such as Montblanc, Coach and Jimmy Choo have been supporting the unit’s growth.

Gross profit amounted to $114.4 million, up nearly 5% year on year. However, gross margin was 59.8%, down 180 bps.   

SG&A expenses amounted to $77.8 million, up 4.9% year on year. As a percentage of net sales, SG&A expenses were 40.7%. The metric declined from 41.9% in the prior-year quarter.

Operating income came in at $36.6 million, up 4.8% year on year. Operating margin was 19.2%, down 50 bps.

Dividend Raise

The company raised its quarterly dividend from 27.5 cents to 33 cents. The dividend will be paid out on Jan 15, 2020 to shareholders on record as on Dec 31, 2019.

Other Financial Aspects

The company ended the quarter with cash and cash equivalents of $138.4 million, long-term debt (excluding current portion) of $10.6 million and total shareholder equity of $ 593.4 million. Inter Parfums closed the quarter with working capital of $375 million and working capital ratio of more than 3.2 to 1.

Guidance

The company continues to expect net sales for 2019 at $712 million.  Additionally, the company raised its bottom-line expectations. It now projects earnings to be $1.90 compared with $1.88 anticipated earlier.

Management plans to release the initial guidance for 2020 on Nov 20, 2019.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 6.25% due to these changes.

VGM Scores

At this time, Inter Parfums has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. 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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