Take A COACH of Luxury Accessories and Money Away

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Apr 23 2007
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Coach Inc. (NYSE: COH, stock) will announce its’ earning tomorrow, Apr-24-2007 (before market open). Coach, Inc. (Coach) is a designer and marketer of handbags and accessories. The Company offers luxury lifestyle accessories to the customers and provides consumers with fresh and relevant products. Coach’s handbags and accessories use a range of quality fabrics and materials. Coach’s primary product offerings include handbags, women’s and men’s accessories, outerwear, business, travel, watches, footwear and eyewear.

Rating Indicators for COH:

  • Wall Street consensus : 0.38
  • StockScouter rating : 9 / 10
  • Whisper Number for this stock : 0.38
  • Schaeffer rating for this stock : 6 / 10
  • Power Rating : 5 / 10
  • Insider Trading (last 52 weeks) : ($82.08 M)
  • Zacks Analysts Rating: Moderate Buy
  • Option Trading: June 2007 52.50 Call
  • Implied Volatility (IV) for May 2007 $52.50 Strike : 31.39%

Sales, Income & Growth – For the past 12-months, Coach registered $2.40 Billion in sales versus the industry’s $7.25 Billion. Income amounted to $579.58 Million against the industry’s $739.66 Million. While Coach’s 12-months sales growth is at 26.5%, the income growth is in the region of 31.90% (the same industry sector sales growth is at 29.80% and income growth of 28.40%).

Profitability & Financial Health – For the past 12-months, net profit margin is in the region of 24.1%. Coach has a debt/equity ratio of 0.01 compare to industry’s ratio of 0.06.

Stock Resistance & Support Level – The resistance is at 53.81 (52-week high) while the first level support is at 49.86 (50-day moving average).

Risks – The price-to-earnings multiple, 35.20 is higher than the average industry level.

Stifel Nicolaus & Co. analyst David A. Schick expects “solid” results for the New York-based company. “We believe strong momentum from the holiday season continued through the third quarter, highlighted by the introduction of the Carly handbag group, new styles in the Hamptons and Soho collections and the introduction of fragrance (store checks indicate strong initial reception),” wrote Schick in an April 20 earnings preview. He affirmed his “Buy” rating, and raised his price target to $55 from $50.

Oppenheimer & Co. analyst Christopher Jones reiterated his “Buy” rating as well. He believed the company will “continue to create innovative products and distribute them through new and existing channels.” Buckingham Research Group analyst David J. Glick predicted Coach will raise 2007 guidance during its earnings conference call on Tuesday.

Checks indicate Coach’s management is focusing on the high-end market and have introduced several items with higher prices than usually found in Coach stores. With it’s almost perfect 45-degrees chart, I couldn’t find a reason not to invest or trade the option of this luxury maker. What more, this stock has been beating earning estimate since 2002 (that’s 5 years in a row). Not many stock can do it, don’t you agree?

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