Oxford Industries (OXM) analysts expect the company to more than double earnings this fiscal year after recently posting its seventh consecutive earnings surprise.
But shares of this Zacks #1 Rank (Strong Buy) are still priced at a discount and it stacks up well against its peers.
Company Description
Oxford Industries in a global apparel company with owned an licensed brands as well as a private label segment. Brands include Tommy Bahama, Ely, Billy London and others. The company’s licensing agreements include brands like Kenneth Cole, Dockers, and Geoffrey Beene.
Beat by a Dime
On Sep 1 Oxford reported second quarter results that included earnings per share of 44 cents, which was 10 cents ahead of the Zacks Consensus Estimate. This marked the seventh consecutive earnings surprise.
Sales for the period were off over $6 million, to $186.5 million. But Oxford has exited businesses that had sales of over $13 million last year. Comparable store sales and web sales showed increases.
Bullish Outlook
Oxford chose to raise its fiscal 2010 guidance even though it is “mindful of macroeconomic issues.” The company now expected to earn between $1.82 and $1.92, raising each end of the range by 12 cents.
The sales forecast is now calling for between $800 and $815; both figures were raised $10 million.
Estimates Pop
The Zacks Consensus Estimate for fiscal 2011 jumped 17 cents, to $1.88. Next year’s forecasts are now averaging $2.10, up 6 cents. Last year Oxford made 92 cents, which means the annual growth rates are expected to be 105% and 11%, respectively.
Valuations & Comparisons
Even as analysts are expecting earnings to double, shares are still trading with cheap valuations. The forward P/E is just under 13 times and the PEG ratio is 1.0. Oxfords price to sales is only 0.49, much better than the 1.36 that its peers are averaging.
While Oxford’s net profit margin is inline with the industry, at 3.5% its ROE comes out on top. The company’s return on equity is 24.4% compared to the industry average of 18.5%.
The Chart
Shares of OXM surged on the previously mentioned earnings release and raised guidance, but have not done much since. However, given the valuations there is plenty of upside. If the stock does not move higher soon, look for another move on Oxford’s early December earnings release.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
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