The Timberland Company - Value

Shoes have been a hot fashion statement during the recession. The Timberland Company (TBL) is expected to grow earnings by 68% in 2010 as shoes and accessories were an easy way to spruce up the wardrobe during dark times.

Timberland's success during the recession comes from its powerful brand, especially in boots and other outdoor shoe and apparel items.

The company markets products under several brand names, including SmartWool, Mountain Athletics and, of course, Timberland and Timberland Boot Company. Its products are sold in department stores and Timberland's own retail stores worldwide.

Timberland Beat By 32% in the Third Quarter

On Nov 4, Timberland reported its third quarter results and surprised by 24 cents. Earnings per share were $1.00 compared to the Zacks Consensus of just 76 cents. The company has a good track record of surprising on estimates, having done so 5 quarters in a row.

Revenue rose 2.5% to $432.3 million as growth was strong across Europe and Asia. North America saw a 3.6% decline as sales of wholesale footwear fell.

Asia, not surprisingly, was hot, with a 19.7% increase in revenue to $46.7 million but Asia is the company's smallest segment.

Global footwear sales were flat at $319.8 million but its apparel and accessories sales jumped 11.1% to $106.4 million. Accessories' sales were boosted by Timberland brand apparel in Asia and SmartWool accessories in North America.

Global same store sales also rose by 7.2% from the third quarter of 2009.

Analysts Not So Hot on 2011

While 2010 is shaping up to be an outstanding year, with the Zacks Consensus jumping to $1.68 from $1.34 per share in the last 30 days, which is earnings growth of 68%, analysts appear less bullish on 2011.

The Zacks Consensus has moved up, by 25 cents to $1.70 in the last month but this is earnings growth of just 1.6%.

Several of Timberland's competitors are still expected to see double digit growth in 2011 including Deckers (DECK), at 11.5%, and Rocky Brands (RCKY), expected to grow 18.2%.

Timberland Is a Value Stock

Timberland is on the edge of being just cheap enough to be considered a "value" stock.

Timberland is trading at 14.7x the forward estimate which is under its peers at 16.4. Deckers trades at 20x and Rocky at 10x.

The company has a price-to-book of 2.3, which is within the value parameter of under 3.0, and under its peers at 2.7.

It also has a stellar 5-year average return on equity (ROE) of 14.9%.

Timberland is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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