Sally Beauty Holdings, Inc. - Momentum

Sally Beauty Holdings, Inc. (SBH) recently hit a new multi-year high at $13.62 after reporting an awesome Q3 earnings surprise of 15%. With estimates on the rise and a bullish growth projection, this Zacks #1 rank stock doesn't need a momentum makeover.

Company Description

Sally Beauty Holdings, Inc, together with its subsidiaries, distributes and sells professional beauty supplies worldwide. The company was founded in 1964 and has a market cap of $2.47 billion.

Even though consumers are still relatively weak, people still want to look good. That trend lifted Sally Beauty Supply to strong Q3 results on Nov 18 that handily beat expectations.

Third-Quarter Results

Revenue for the period was up 11% from last year to $748 million. Earnings also looked good, coming in at 23 cents, 15% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 13% over the last three quarters.

The company's largest segment, Sally Beauty Supply, was up 8.5% from last year to $475 million. The gains were driven by strong same-stores sales, up 4.7% after seeing a 3.1% gain last year. Margins were also on the upswing, climbing to 53.2% from 51.8% last year.

Sally Beauty Supply's other segment, Beauty Systems, was up 14.5% to $238 million, with same-store sales up 6.9% and gross margin up to 40.5% from 39.3%.

Paying Down Debt

Although the company doesn't have the most stellar balance sheet, it continues to chip away at its debt, with total debt down $115 million from last year to $1.56 billion.

Estimates

In spite of the very recent Q3 results, we have already seen some movement in estimates, with the current year up 4 cents to 93 cents and the next-year estimate up 2 cents to $1.09, a bullish 18% growth projection.

Valaution

But in spite of the gains, SBH still has value, trading with a forward P/E of 14X, a discount to the industry average of 16.5X.

2-Year Chart

On the chart, SBH has been trending higher for most of the last 18 months, recently jumping higher on the good quarter to hit a new multi-year high at $13.62. The MACD below the chart is looking bullish too, with the short-term average advancing ahead of the long-term average. Look for support from the trend line on any weakness. Take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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