Steve Madden Ltd. - Momentum

Steve Madden Ltd. (SHOO) recently hit a new all-time high at $44.85 before reporting solid Q3 results that included a 5% earnings surprise. With an average earnings surprise of 14% over the last four quarters and a bullish growth projection, SHOO is kicking up the momentum meter a notch or two.

Company Description

Steve Madden, Ltd., together with its subsidiaries designs and sells footwear for men, woman and children worldwide. The company was founded in 1990 and has a market cap of $1.16 billion.

With the global economy on the mend over the last 18 months, consumers are slowly gaining the confidence to spend on discretionary items like shoes and accessories. We have seen that show up in companies like Discount Shoe Warehouse (DSW), Deckers Outdoor Corp. (DECK) and of course, Steve Madden, which reported solid Q3 results on Nov 3 that came in ahead of expectations. Let's go ahead and take a closer look.

Third-Quarter Results

Revenue for the period was up 31% from last year to $184 million. Earnings also came in strong at 81 cents, 5% ahead of the Zacks Consensus Estimate, where the company now has an average earnings surprise of 20% over the last four quarters.

The good quarter was driven by Madden Girl, Steve Madden's Men's and growing demand internationally. Retail net sales were up 10% to $31 million while same-store sales were up an impressive 15.7%.

Although gross margin slid to 42% from 44% on its wholesales segment, operating expenses declined to 25.4% of revenue from 27.9% last year.

Strong Balance Sheet

Steve Madden also enjoys the financial flexibility of its strong balance sheet, with cash and equivalents of $29 million and no debt.

Estimates

We did see some upward movement in estimates on the good quarter, with the current year adding 5 cents to $2.61 and the next-year estimate adding 5 cents to $2.9i8, a solid 14% growth projection.

Valuation

In spite of recent gains, SHOO still looks reasonably priced, with a forward P/E of 16X and PEG ratio (PE/Growth) of 1.14.

2-Year Chart

On the chart, SHOO hit a new all-time high above $48 in mid October before pulling back a bit on general market volatility. Look for support from the long-term trend 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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