Update: Luxottica Q2 Earnings

Jul.25.14 | About: Luxottica Group (LUX)

Summary

Sales are up 7% at constant Forex driven by a strong quarter in Emerging Markets and North America, despite currencies headwinds.

The results reinforce even more my opinion on the stock.

As I said in my original article, Emerging Markets, along with solid North America and Europe, are what will keep the company growing at a great pace.

A great quarter for the eyewear company

The Milan-based eyewear company Luxottica (NYSE:LUX) posted figures that are, in my opinion, a huge step forward for the company since it was able to overcome currencies headwinds by posting revenue growth in North America of 4%, in Europe of 8% and more importantly in the Emerging Markets of 21% with peaks in Brazil (+17%), India (+24%), Turkey (+66%) and China (+28%). China is the country where the company seems to be more satisfied, because, as it said in the conference call, it has been working very hard in order to educate, build and invest and this hard work is starting to pay off.

Luxottica also posted record figures in Free Cash Flow (€321m, up 60% compared to Q2 2013) and net margin (10.1% in the first half of 2014, compared to 9.7% in the first half of 2013). Moreover the company is very confident that currency headwinds will start to ease and in Q3 we should start to see the effect of the price increases (page 19 of the presentation) in North America and in the EM, along with an order portfolio up double-digits.

The results make me even more confident that LUX is a must own

As I said in my original article, the increasing demand in EM will keep the company growing at this pace (or even higher), but even if there is a slowdown in EM (which I believe is very unlikely) the company is geographically well positioned to cope with such a slowdown in some parts of the world. As a consequence, along with the absence of competitors, I confirm my BUY rating on the stock for the long term. I believe that the FCF will keep growing and so will do the dividends, no matter how troubled the currency market is.

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