Pat McKeough responds to many personal questions about specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for the Inner Circle. This week, we received a question from an Inner Circle member on an Italian eyewear company whose products range from popular brands like LensCrafters to luxury names like Prada. The company, which trades as an ADR, makes the majority of its sales in North America, and Pat looks at its prospects for growth in an uncertain global economy. Q: Pat: What is your opinion on Luxottica Group? Thanks. A: Luxottica Group SpA (ADR), (symbol LUX on New York; www.luxottica.com), is an Italian company that sells prescription eyewear and sunglasses. It has six plants in Italy and one in China. The retail division operates nearly 5,500 company-owned, franchised and leased locations under the LensCrafters, Sunglass Hut, Pearle Vision and Sears Optical banners. The wholesale division makes and distributes over 2,400 frame styles, including company-owned brands (notably Ray-Ban and Oakley) and licensed labels (including Chanel, Bulgari, Prada, Tiffany, Coach and Armani). Luxottica also owns EyeMed Vision Care, the second-largest eye-care insurance company in the U.S. [ofie_ad]
Luxxotica sees surprisingly strong demand in Europe
In the three months ended September 30, 2012, Luxottica’s revenue rose 17.0%, to 1.78 billion euros ($2.33 billion U.S.) from $1.52 billion euros a year earlier. Earnings per ADR rose 12.1%, to $0.37 U.S. from $0.33 U.S. Luxottica’s sales are rising in North America (which accounts for 60% of its overall sales), and it is seeing surprisingly strong demand in Europe (20% of sales), including improvement in the recession-hit southern part of the continent. A large portion of Luxxotica’s revenue comes from prescription glasses, which it sells through its LensCrafters and Pearle Vision outlets. Luxottica trades at 24.9 times this year’s forecast earnings of $1.55 per ADR. The ADRs yield 3.2%. In the most recent Inner Circle Q&A, Pat looks at Luxxotica’s prospects for growth in emerging markets like China and Brazil and with a weaker economy in Europe and North America. He also looks at whether the company can continue to justify its high multiple of almost 25 times earnings. He concludes with his clear buy-hold-sell advice on this stock. (Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.) COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members Which would you expect to generate higher sales in a stagnant economy, luxury goods like Prada or lower-priced outlets like LensCrafters? Let us know what you think.
