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This story initially appeared on MarketBeat
In true Rocky Balboa style, Rocky Manufacturers (NASDAQ:RCKY) has picked itself off the mat and staged a exceptional comeback. Because the pandemic landed an uppercut and despatched the inventory beneath $20 for the primary time since 2018, Rocky Manufacturers has greater than tripled.
The Ohio-based footwear firm has been kicking butt over the previous 12 months because of a string of knockout earnings experiences and prospects for continued development. After a robust begin to fiscal 2021, Rocky Manufacturers is now buying and selling at an all-time excessive above $60. Is it too late to attempt on for dimension?
What Does Rocky Manufacturers Do?
Rocky Manufacturers is a lesser-known shopper discretionary firm, but it has been making premium footwear, attire, and equipment for nearly 90 years. Its historical past on the general public inventory change dates again to 1993.
Its portfolio of in-house manufacturers caters to a variety of blue-collar prospects from building staff and outdoorsmen to navy personnel and country-western varieties. Along with its well-liked Rocky, Durango, Lehigh, and Georgia Boot merchandise, it sells Michelin footwear by way of a licensing settlement. Sure, this is similar Michelin makes tires—and, actually, the expertise used to make the tires is similar used to make Michelin shoe soles.
Through the years, Rocky Manufacturers has added to its model lineup by reaching into surprising corners of the company world. Earlier this yr, it acquired Honeywell Worldwide’s footwear enterprise for $230 million. It’s best recognized for The Authentic Muck Boot Firm model and owns a number one clothes shop for the industrial fishing market known as XTRATUF that Alaskan fishermen have been sporting for many years. The deal will considerably enhance to Rocky’s efficiency footwear lineup, gross sales, and is predicted to be instantly accretive to earnings.
How Did Rocky Manufacturers Do in 2021 Q1?
On the heels of three consecutive large earnings beats, Rocky Manufacturers was at it once more to kickoff fiscal 2021. The corporate reported document first-quarter numbers that included 57% year-over-year income development to $87.7 million. The wholesale enterprise did notably properly rising gross sales 69% whereas the recovering retail enterprise notched 42% development. Gross sales within the a lot smaller third phase, Army, have been up 16% to $4.4 million.
Adjusted internet revenue was soared 344% to $8.7 million and adjusted earnings per share (EPS) got here in at $1.19. This was the results of a formidable 5.4% gross margin enlargement to 40.1%. It was additionally encouraging that Rocky Manufacturers’ largest phase, Wholesale, skilled the most important margin enlargement.
To be truthful, nevertheless, Rocky Manufacturers confronted a straightforward comparability in Q1 given the impression of COVID-19 on the primary quarter of 2020. The pandemic pressured the momentary closure of the corporate’s manufacturing services and led to a $1 million working expense.
However, each the highest and bottom-line outcomes trounced analysts’ forecast of $71.3 million in income and adjusted EPS of $0.59. This together with administration’s upbeat tone drove the refill 15% as of noon Cinco de Mayo buying and selling.
Is Rocky Manufacturers Inventory a Purchase?
Its exhausting to not like Rocky Manufacturers. Not solely does it have a robust, rising portfolio of high-quality footwear manufacturers, however the firm is shareholder-friendly. It pays a 2% dividend, an unusual yield for a corporation its dimension (~$380 million). Administration additionally not too long ago introduced a brand new $7.5 million inventory buyback program that can take the place of the one which simply expired.
With this stated, Rocky Manufacturers is getting a bit overheated. The inventory is up greater than 120% year-to-date in comparison with 21% for the S&P 600 small-cap index. It has additionally stretched exterior the higher Bollinger band, an space that has traditionally been adopted by a correction. Buyers ought to subsequently search for a greater entry level on this one. One other low quantity pullback like what we noticed previous to this week’s earnings can be a great time to leap in.
However there is not a must be too choosy with the entry level right here. That is as a result of Rocky Manufacturers remains to be cheap at roughly15x ahead earnings. That is significantly beneath the footwear and attire trade common of 23x.
The 2 sell-side analysts that cowl Rocky Manufacturers each reiterated their scores post-earnings, one being a purchase, the opposite a maintain. Their $65 and $68 value targets, nevertheless, recommend restricted upside from right here and confirms what the technical image says about discovering a greater entry.
Rocky Manufacturers within the low to mid $50’s can be an excellent time to step into the ring and experience a comeback Sylvester Stallone can be pleased with.
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