Skullcandy, Inc. (SKUL) reported better-than-expected results for second-quarter 2014. Earnings came in at 6 cents per share, improving over a loss of 2 cents per share recorded in the year-ago quarter. The bottom-line surpassed the Zacks Consensus Estimate of one cent.
Innovation and diversified product offerings drove Skullcandy’s upbeat earnings in the quarter.
Revenue
Skullcandy generated net revenues of $53.9 million, rising 6.0% year over year but in line with the Zacks Consensus Estimate.
Revenue from the company’s domestic operations grew 6% year over year to $39.5 million, representing 73.3% of net revenues. International revenues were $14.4 million, up 5.9% from $13.6 million in the year-ago quarter.
Margins
Cost of revenues advanced 5.8% year over year, representing 55.0% of total revenue, slightly below 55.1% in the prior-year quarter. Selling, general and administrative expenses, as a percentage of total revenue, were 42.6%. Operating margin in the quarter was 2.4%.
Balance Sheet/ Cash Flow
Exiting second-quarter 2014, Skullcandy had cash and cash equivalents of $44.1 million, down from $48.2 million in the previous quarter.
In first-half 2014, the company generated net cash of $7.1 million, down 41.2% from $12.1 million in the year-ago comparable period. Capital spending soared 74.4% year over year to $3.3 million.
Outlook
For 2014, Skullcandy anticipates sales to grow in the mid to high single digit range. Generally Accepted Accounting principles (GAAP) earnings are predicted within 22−26 cents per share versus the earlier projected range of 16−20 cents. GAAP operating income will likely be in $8.3−$9.7 million range.
For the third quarter, sales are estimated to grow in the 7−9% range while GAAP earnings will likely come within 2−5 cents per share.
With a market capitalization of nearly $189 million, Skullcandy presently sports a Zacks Rank #1 (Buy). Other stocks worth considering in the industry include Dolby Laboratories, Inc. (DLB), Panasonic Corporation (PCRFY) and Sharp Corporation (SHCAY). All these companies carry a Zacks Rank #2 (Buy).
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