Movado Group, Inc.
) announced outstanding second quarter fiscal 2013 results, which
included an earnings surprise of 57.9% and year-over-year profit
growth of 67.0%. The fiscal 2013 earnings guidance was raised
significantly following the impressive first half performance. This
Zacks #1 Rank (Strong Buy) designer of quality watches has
surpassed the Zacks Consensus Estimate in six of the last seven
quarters and boasts a huge average surprise of 200.0%.
Solid Second Quarter Beat
On August 25, 2012, Movado reported second quarter fiscal 2013
adjusted earnings of 30 cents per share (excluding a one time
gain), beating the Zacks Consensus Estimate of 19 cents.
Net sales advanced 4.2% to $118 million from the prior-year
quarter, driven by solid demand. Revenues increased 7.6% on a
constant currency basis, driven by strong performance of the Movado
and licensed brands.
Excluding sales from the ESQ and Ebel watch brands, revenue would
have jumped 15.1%. The company strategically reduced the shipment
of these brands, as it plans to re-launch them in fall.
Gross margins expanded an impressive 190 basis points over the
prior-year quarter to 55.7%. It was driven by fixed cost leverage
and a channel and product mix shift.
Operating margins more than doubled to 9.2% of sales from 4.4% in
the prior-year quarter, driven by gross margin expansion and a
decline in selling, general & administrative (SG&A)
Movado raised its outlook for fiscal 2013, and now expects sales to
increase 10% year over year to $510 million. It had previously
expected sales between $505 million to $510 million. The guidance
does not include an impact from foreign exchange.
Adjusted operating income is expected to expand between 43% and 46%
to $49 million - $50 million. Adjusted EBITDA is expected to
increase over 30% to between $60 million and $61 million in fiscal
The effective tax rate is seen at 25%, lower than the prior
expectation of 30%. Earnings are predicted to be $1.40 per share,
much higher than previous expectations of $1.15.
For the rest of the year, Movado will continue to work toward
building its strategic initiatives, launch new products and refine
its existing products.
Earnings Estimates Rising Sharply
Over the last 30 days, the Zacks Consensus Estimate for fiscal 2013
has advanced by 25.4% to $1.53. The Zacks Consensus Estimate for
fiscal 2014 has moved up approximately 9.2% to $1.67 over the same
Movado looks expensive at current levels. It trades at a forward
price-to-earnings (P/E) of 23.72x, representing a premium of almost
15% to the peer group average of 20.63x. On a price-to-sales basis,
shares trade at 1.88x, a 129.0% premium to the peer group average
of 0.82x. Furthermore, the stock has a trailing 12-month return on
equity (ROE) of 9.3%, which is below its peer group average of
12.3%. However, the premium valuation looks justified given its
Chart Shows a Consistent Advance
Shares of Movado have been rising consistently since early August
and reached a new 52-week high of $37.15 on September 7, a few days
after announcing the solid second quarter results. Moreover, the
stock is currently trading above its 50- and 200-day moving
averages, which stand at $27.01 and $23.25, respectively. In fact,
the stock has been consistently trading above its 50-day and
200-day moving averages since early and mid August, respectively.
Volume is strong, averaging roughly 399K daily. Movado has mostly
outperformed the S&P 500 over the past six months. The
year-to-date return for the stock is 99.71% compared with the
S&P 500's return of 13.64%.
Based in Paramus, New Jersey, Movado is a designer, manufacturer
and distributor of quality watches. It offers its watches in almost
every price category. Its popular luxury brands include Ebel and
Concord and accessible luxury brands are Movado and ESQ. The
company also sells certain watch brands like Coach, Lacoste and
Tommy Hilfiger under licensing agreements with the owner company.
The market cap of the company is $927.2 million.
MOVADO GRP INC (MOV): Free Stock Analysis
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