Iconix Brand Group, Inc. - Value
June 22 2011 - 8:00PM
Zacks
Iconix Brand Group, Inc. (ICON) saw record revenue in the
first quarter as its collection of brands saw strong growth,
including internationally. Even with shares near a 10-year high,
this Zacks #1 Rank (strong buy) still has attractive valuations,
with a forward P/E of 14.3.
Iconix Brand Group was formerly Candie's but
changed its name to acknowledge the wealth of consumer brands the
company now owns and licenses to major retailers and
manufacturers.
Those include, of course, Candie's, but also
Badgley Mischka, Joe Boxer, Rampage, Mudd, London Fog, Mossimo,
Danskin, Roca Wear, Cannon, Royal Velvet, Fieldcrest, Charisma,
Starter and Waverly.
The company also owns an interest in the Artful
Dodger, Marc Ecko, Zoo York, Material Girl and Peanuts.
Acquired More of the Ed Hardy Brand
On Apr 27, Iconix Brand announced it acquired the
worldwide master license for the Ed Hardy brand for $55 million
plus $7 million earn-out from Nervous Tattoo.
Nervous Tattoo will continue as a licensee for Ed
Hardy T-shirts, hats and hoodies. This acquisition increased its
total ownership stake in the Ed Hardy brand to 85%.
The company had previously had a small investment
in the brand through a joint venture with Don Ed Hardy, the artist
who is known as the "godfather of the modern tattoo."
Iconix Brand estimated that the Ed Hardy brand will
generate total annual royalty revenue between $15 and $16
million.
Iconix Brand Has a Record First Quarter
On Apr 27, Iconix Brand reported its first quarter
results and beat the Zacks Consensus Estimate by 9.8%. It was the
5th consecutive earnings beat.
Earnings per share were a record 45 cents compared
to the consensus of 41 cents. It made just 36 cents in the year ago
quarter.
Revenue soared 29% to a record $92.4 million from
$71.7 million in the first quarter of 2010.
All of its brands showed strength but it was
especially strong in the direct-to-retail brands, which continued
to gain shelf space. International sales also expanded as its
partners opened up hundreds of stores in China.
Raised 2011 Guidance
Given the beat and the Ed Hardy acquisition, which
will definitely impact revenue, the company raised both its revenue
and EPS guidance for 2011.
Revenue is now expected between $355 - $365
million, up from the prior guidance of $340 to $350 million.
Earnings per share jumped to the range of $1.50 to
$1.55 from $1.40 to $1.45.
Analysts are even more bullish, as the Zacks
Consensus has risen to $1.66 from $1.54 in the last 2 months.
That is earnings growth of 15%.
Shares Near 10-Year High
The record quarter was icing on the cake for
shareholders, who have been celebrating a stock trading around 10
year highs for the past several months.
![](http://www.zacks.com/images/upload_dir/1308771188.jpg)
But even with the shares at such elevated levels,
earnings have been keeping the pace which results in a stock that
still has attractive valuations.
In addition to a P/E under 15, which is what I use
to determine a "value" stock, Iconix Brand has a price-to-book
ratio of only 1.5. A P/B ratio under 3.0 is what I use to determine
value.
Additionally, the company has a solid return on
equity (ROE) of 10.2%.
There is growth in consumer brands, especially
overseas, as consumers are opening their wallets now that the
global economy is recovering. With double digit earnings growth
expected in 2011, and cheap value metrics, Iconix Brand is an
attractive value stock.
Tracey Ryniec is the Value Stock Strategist for
Zacks.com. She is also the Editor of the Turnaround Trader and
Insider Trader services. You can follow her at
twitter.com/traceyryniec.
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