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Why Iconix Brand Group Inc Stock Tumbled Today

By Jeremy Bowman – Nov 8, 2016 at 6:51AM

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Shares of the brand-licensing specialist fell as it cut its revenue guidance for the year.

Image source: The Motley Fool. 

What happened

Shares of Iconix Brand Group (ICON) were taking a spill on Tuesday after the fashion-brand holding company lowered its revenue guidance in its third-quarter earnings report. As of 11:00 a.m. EST, the stock was down 9.5%.

So what

The parent of brands including Ed Hardy, Candies, and Umbro actually beat analyst estimates for the quarter. Adjusted earnings per share improved from $0.11 a year ago to $0.19, ahead of expectations of $0.17, while revenue slipped 0.4% to $90.9 million, though that also topped estimates of $88.9 million.

CEO John Haugh said the company delivered another "solid quarter," adding that "performance across brands was mixed" but the company was able to increase profits and cash flow and maintain stable revenue.

Now what 

Despite beating estimates, Iconix said it expected full-year revenue to be $3 million to $5 million less than its previous guidance at the low end of its $370 million to $390 million range. That reduction was due to delayed timing in "some new men's programs, macro conditions in Europe, and some retail assets." That compares to the analyst consensus of $371.1 million. 

The company maintained its full-year adjusted EPS guidance of $1.06 to $1.21, but lowered GAAP EPS guidance by $0.04, to $0.93 to $1.08, due to higher-than-expected fees from a previously disclosed SEC investigation. Analysts have projected adjusted EPS at $1.17.

Despite the guidance cut, Iconix's steps toward profitability look promising as sellling, general, and administrative expenses have fallen sharply. At a price-to-earnings ratio of less than 7, the stock could jump if the company delivers steady profit growth.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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