Carter's, Inc.
(
CRI
) reached a new all-time high after reporting yet another strong
quarter with earnings that came in 36.6% ahead of the Zacks
Consensus Estimate. This branded children's wear marketer has
beaten the Zacks Consensus Estimate for seven straight quarters
with an average earnings surprise of 27.8%.
A bullish growth projection for the second half, backed by rising
estimates, makes this Zacks #1 Rank stock another momentum pick.
Solid First Quarter Results
On April 26, 2012, Carter's reported first quarter 2012 adjusted
earnings of 56 cents per share, which largely surpassed the Zacks
Consensus Estimate of 41 cents. However, earnings were flat on a
year-over-year basis as top-line growth was offset by higher
product costs related to cotton prices and labor rates.
Total net sales during the quarter grew 17.6% year over year to
$551.7 million, which beat the Zacks Consensus Estimate of $529.0
million. All segments (Carter's retail, Carter's wholesale, OshKosh
retail, OshKosh wholesale and international) registered positive
growth with the Carter's retail and international segments posting
the maximum increases. The June 2011 acquisition of Bonnie Togs, a
retailer of children's apparel in Canada, boosted international
sales.
Gross margins expanded 160 basis points to 35.3% as volume growth
and price increases made up for the higher product costs. Adjusted
operating income was $55.6 million in the quarter, up 1.7% from the
prior-year quarter.
Impressive Outlook
The company forecasts meaningful top- and bottom-line growth in the
second half on expectations of lower product costs. For the second
quarter, Carter's expects revenue to increase by 20% year over
year. Moreover, adjusted earnings are expected to come in the range
of 26 cents to 30 cents, compared with 23 cents in the year-ago
quarter.
For the full year, net revenue is expected to increase between 9%
and 11% over 2011 levels, while adjusted earnings per share are
expected to increase 20% to 25% over the prior-year earnings of
$2.09.
Estimates Going Up
Carter's forecast beating first quarter 2012 earnings resulted in
an uptrend in estimate revisions. The Zacks Consensus Estimate has
risen by 8.5% to $2.68 for fiscal 2012 and by 8.4% to $3.37 for
fiscal 2013 over the last 60 days.
Slightly Expensive Valuation
With Carter's outperforming quarter after quarter, its valuation is
a little expensive. It currently trades at a forward
price-to-equity (P/E) of 19.49x, reflecting a 45% premium to the
peer group average of 13.44x. On a price-to-sales basis, shares
trade at 1.45x, a 104% premium to the peer group average of 0.71.
Also, the stock has a trailing 12-month return on equity (ROE) of
15.7%, which is slightly below its peer group average of 16.6%.
Chart Echoing Strength
Shares of Carter's have been continuously rising since August 2011.
The stock price has almost doubled since the announcement of the
Bonnie Togs acquisition in June 2011, fueled further by successive
upbeat results. Moreover, the stock is currently trading above its
50- and 200-day moving averages, which stand at $51.52 and $42.15,
respectively. In fact, the stock has been consistently trading
above its 200-day moving average since October 3, 2011.
Volume is fairly strong, averaging roughly 835K daily. Carter's has
outperformed the S&P 500 over the past six months. The
year-to-date return for the stock is 31.26% compared with the
S&P 500's return of 4.08%.
Company Description
Based in Atlanta, Georgia, Carter's markets a portfolio of apparel
brands, especially for babies and young children. It is the largest
children's wear branded marketer in the U.S. and some of its
popular brands include Carter's, Child of Mine, Just One You,
Precious Firsts, and OshKosh. Among these, the most recognized
brands are Carter's and OshKosh, which are widely available across
department stores, speciality retailers and national chains
worldwide. These brands are also sold at more than 600 company
operated stores and through e-commerce channels. Other brands are
available at Wal-Mart Stores Inc. (
WMT
). The market cap of the company is $3.11 billion.
CARTERS INC (CRI): Free Stock Analysis Report
CARTERS INC (CRI): Free Stock Analysis Report
To read this article on Zacks.com click here.