Iconix Brand Group Inc. (ICON) delivered better-than-expected fourth quarter 2011 results with adjusted earnings of 41 cents a share, which soared 24.2% from 33 cents a share in the year-ago period. Earnings also surpassed the Zacks Consensus Estimate of 38 cents.
The fiscal 2011 earnings of $1.69 per share also surpassed both the year-ago earnings and the Zacks Consensus Estimate by 25 cents and 3 cents per share, respectively.
The year experienced steady organic strength across its portfolio of brands as well as strong top-line growth. The company also witnessed international expansion along with partnerships made in China, Latin America, Europe and joint venture in India, contributing to maximize the value of its brands around the world.
The adjusted earnings in the quarter excludes non-cash interest related to ASC 470, non-cash gain related to investment in Ed Hardy, and write-off of deferred financing fees and original issue discount, net of tax.
On a reported basis, including one-time items, earnings came in at 36 cents a share versus 30 cents delivered in the prior-year quarter. In fiscal 2011, earnings came in at $1.67 per share versus $1.32 per share.
Iconix forecasts its fiscal 2012 reported earnings in the range of $1.62 – $1.69 per share, while it expects its operating earnings in the range of $1.77 – $1.84 per share. The Zacks Consensus Estimate for fiscal 2012 is $1.83 per share.
Quarter in Detail
Total revenue for the quarter jumped 9.0% to $95.5 million from $88.0 million in the year-ago period. Revenue also increased 11.0% to $369.8 million in fiscal 2011.
Iconix also expects its revenue target of $370.0-$385.0 million in 2012.
On a year-ago basis, EBITDA decreased 2.3% to $57.3 million in the fourth quarter. Excluding a one-time litigation gain in the fourth quarter of 2010, EBITDA spiked 34% over the prior year quarter. EBITDA in fiscal 2011 increased 10% to approximately $229.6 million.
Iconix exited the year with free cash flow of $179.2 million. In the fourth quarter, free cash flow was approximately $44.9 million. For fiscal 2012, the company expects its free cash flow in the range of $187.0 million to $194.0 million.
Iconix believes that it is well positioned to maintain its growth trends with the expansion of brands both in the U.S. and internationally , besides acquisition of additional iconic brands. The acquisition of Ed Hardy brand from Nervous Tattoo has increased the total ownership stake of Iconix in the Ed Hardy brand to 85%. Additionally, Iconix will gain control of the licensing and marketing functions.
The company also faces stiff competition from Gap Inc. (GPS), Cherokee Inc. (CHKE) and The Jones Group Inc. (JNY). Integration risks also remain a concern.
Currently, Iconix has a Zacks #4 Rank, implying a short-term Sell recommendation. On a long-term basis, the stock holds a Neutral rating.
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