Iconix Brand Group, Inc. (ICON) posted fourth quarter 2013 adjusted earnings of 54 cents per share, which lagged the Zacks Consensus Estimate of 58 cents by 6.9% on the back of softer revenues. However, earnings increased 32% from the year-ago earnings of 41 cents. The upswing can be attributed to solid revenues, strategic acquisitions and lower share count owing to share buyback.
Quarter in Detail
Total revenue of $105.3 million was in line with the Zacks Consensus Estimate. Revenues surged 24% year over year driven by the company’s recent acquisitions (Umbro, Buffalo and Lee Cooper), strong performance of core brands and increased contribution from international joint ventures. During the quarter, the company formed two new international joint ventures in Southeast Asia and Israel. These joint ventures together contributed approximately $7 million to revenues in the quarter.
On a year-over-year basis, earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 20% to $60.1 million in the fourth quarter.
Iconix exited the quarter with free cash flow of $62.9 million compared with $54.3 million at the end of the third quarter of 2013.
During the fourth quarter, the board of Iconix authorized a new share repurchase program of $500 million for three years. The company currently has approximately $110 million remaining under the previous $300 million stock repurchase program approved in Jul 2013.
2013 Results
In 2013, Iconix posted adjusted earnings of $2.39 per share, beating the Zacks Consensus Estimate of $2.33 per share by 2.6%. Earnings came within the company’s guided range of $2.30-$2.40 per share and increased 41% from the year-ago earnings of $1.70, fueled by higher sales, continued international expansion, acquisition of three global brands and lower share count owing to share buybacks.
In 2013, the company formed four new international joint ventures in Canada, Australia, Southeast Asia and Israel. With these joint ventures and acquisition of global brands, the company’s international business contributes 37% of the total business, up from 24% in 2012.
Total revenue grew 22% to $432.6 million, in line with the Zacks Consensus Estimate and within the company’s guided range of $425–$435 million.
Guidance for 2014
Iconix reiterated its earnings and revenue guidance for 2014. The company continues to expect revenues in the range of $440 million-$455 million. Adjusted earnings are expected in the range of $2.50-2.60 per share for 2014. Free cash flow is expected in the range of $210-$217 million.
Iconix’s fourth quarter was quite weak, but its overall growth story looks compelling. This clothing brand licensing company has been aggressively acquiring brands and entering into joint ventures to expand its portfolio. Going forward, the company expects international expansion to boost organic growth for its brands.
Iconix holds a Zacks Rank #3 (Hold). Better-ranked stocks in the consumer discretionary sector include Hanesbrands Inc. (HBI), Joe’s Jeans Inc (JOEZ) and Michael Kors Holdings Ltd (KORS), all with a Zacks Rank #1 (Strong Buy).
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