) reported a big Q1 miss back in June due to revenue and gross
margin pressure. This prompted analysts to revise their estimates
significantly lower for Quiksilver, sending the stock to a Zacks
Rank #5 (Strong Sell).
Although shares of Quiksilver have fallen considerably since the Q1
report, the stock still does not look a value at 36x forward
earnings. Investors should consider avoiding the stock until its
earnings momentum turns around.
Quiksilver produces and distributes apparel, footwear and
accessories. Its three flagship brands are Quiksilver, Roxy, and
DC. The company was founded in 1976 and is headquartered in
Huntington Beach, California.
Second Quarter Results
Quiksilver delivered disappointing first quarter results in June.
Earnings per share came in at -$0.12, badly missing the Zacks
Consensus Estimate of +$0.04. It was also below a loss of 1 cent in
the same quarter last year.
Net revenues declined 5% year-over-year to $458.7 million, well
below the consensus of $506.0 million. Revenue fell in all three of
its flagship brands, with Quiksilver down -10% in constant
currency. Geographically, sales were strongest in the Americas and
weakest in the EMEA region.
The gross profit margin declined 320 basis points to 46.0% of
revenue due in part to increased discounting.
Analysts have been revising their estimates lower for both 2013 and
2014 over the last several weeks, which has sent the stock to a
Zacks Rank #5 (Strong Sell).
The Zacks Consensus Estimate for 2013 is now -$0.15, down from
+$0.14 just 90 days before. The 2014 consensus is currently +$0.21,
down from +$0.35 over the same period.
You can see the drop in consensus estimates in the following chart:
Shares of Quiksilver are down more than -30% since late May.
Despite this, the stock doesn't look like a value here. Shares
currently trade around 36x 12-month forward earnings (assuming
those estimates don't fall any further), which is a premium to the
industry median 17x. And its price to book ratio of 1.7 is above
its historical median of 1.6.
The Bottom Line
With falling earnings estimates and premium valuation, investors
should consider avoiding this Zacks Rank #5 (Strong Sell) stock
until its earnings momentum turns around.
Investors still interested in the 'Textile - Apparel' industry may
want to take a look at
), which both carry a Zacks Rank of 1 (Strong Buy).
Todd Bunton is the Growth & Income Stock Strategist for
and Editor of the
Income Plus Investor service
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