HSN Inc.: A Strong Buy - Analyst Blog
January 02 2013 - 10:50AM
Zacks
Shares of HSN Inc. (HSNI) have been steadily
advancing since the beginning of 2012, and are now hovering close
to its 52-week high of $55.97 touched on December 24, 2012. This
Zacks #1 Rank (Strong Buy) multi-channel retailer has surged 52.1%
in a year, demonstrating its strong fundamentals.
The stock’s momentum underscores HSNI’s differentiated
merchandise offerings, digital expansion and strategic investments
in brands and acquisitions.
The Rank Drivers
HSN has outperformed the Zacks Consensus Estimate in 10 of the
past 13 quarters with an average beat of 20.5%. Moreover, strong
third-quarter 2012 results and rising estimates aided the stock to
attain a Zacks #1 Rank on January 1, 2013.
On October 31, 2012, HSN reported third quarter earnings of 61
cents per share that beat the Zacks Consensus Estimate of 49 cents
by 24.5% and surged 48.8% from last year’s 41 cents.
Consolidated net sales of $778.8 million jumped 7% from the
year-ago quarter with digital sales rising 16%. HSN, the namesake
operating segment, witnessed sales growth of 5% to $537.4 million,
including a 10% increase in digital sales, while sales for the
Cornerstone segment climbed 13% to $241.4 million with digital
sales surging 22%.
Gross profit grew 9% to $285.5 million, and gross profit margin
expanded 70 basis points to 36.7%. Operating income came in at
$49.3 million, almost flat with the year-ago quarter.
Earnings Momentum Climbing
Over the past 60 days, the Zacks Consensus Estimate for 2012
rose 3.9% to $2.64 per share, implying year-over-year growth of
26.7%. For 2013, the Zacks Consensus Estimate is $3.31 per share,
marking an increase of approximately 5.4% over the same time frame
and suggesting year-over-year growth of 25.6%.
Valuation Stretched, Yet Lucrative
HSN currently trades at a forward P/E of 20.90x, reflecting a
22.3% premium to the peer group average of 17.09x. Its
price-to-book ratio of 6.50 is substantially higher than the peer
group average of 2.22. Given the company’s compelling fundamentals,
the premium valuation is justified and well supported by its
long-term estimated EPS growth rate of 18% versus 15% for the peer
group.
With respect to return on equity (ROE), the stock looks
attractive. It has a trailing 12-month ROE of 26.7%, which is
significantly above its peer group average of 7.6%. This implies
that the company reinvests its earnings more efficiently than its
peer group.
Overview
Headquartered in St. Petersburg, Florida, HSN is an interactive
multichannel retailer, operating under two segments -- the namesake
HSN and Cornerstone. The company provides jewelry collections,
fashion attire and accessories, beauty products, housewares,
electronics products, and other items via HSN television networks,
HSN.com, mobile applications, and brick and mortar stores.
Cornerstone offers home related merchandises, apparel and
accessories under brands such as Ballard Designs, Chasing
Fireflies, Frontgate, Garnet Hill, Grandin Road, Improvements and
TravelSmith. HSN, which competes with ValueVision Media
Inc. (VVTV), currently has a market cap of $2.99
billion.
HSN INC (HSNI): Free Stock Analysis Report
VALUEVISION CLA (VVTV): Free Stock Analysis Report
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