Coach (COH): Luxury profits

"Coach (NYSE: COH) was just added to our 'Growth & Income' model portfolio," says Alex Kolb, an analyst with the top-notch Zacks Investment Research. Here's his review of the high-end retailer.

"The company is a specialty retailer of accessories and gifts including handbags, belts and watches.

"Coach reported fiscal first quarter results on October 20. Earnings per share of 44 cents surpassed the Zacks Consensus Estimate of 39 cents by 13%. The company has delivered an average upside earnings surprise of 5% over the past 4 consecutive quarters.

"Sales rose 1% to $761 million from $753 million in the year ago period. Same store North American sales declined 1%, but direct-to-consumer sales, which included China, rose 10%. Analysts polled by Zacks are bullish on earnings for COH.

"For the year ending June 2010, the Zacks Consensus Estimate of $2.03 was increased from $1.93 in just the past week. For the following year, forecasts of $2.19 climbed from $2.10.

"The company offers solid fundamentals, trading with a forward P/E of 17.1. Coach's return on equity (ROE) of 41% soars past the industry average of 10%. 

"The company's net profit margin of 19% compares to a negative industry average. COH pays an industry-leading dividend yield of 1%.COH is also strong technically, outpacing the market by about 50% over the past year.  The stock earns our Zacks #1 Rank (Strong Buy) rating."