Elizabeth Arden (RDEN), Zacks Rank #5 (Strong Sell), posted an outsized downside earning surprised when it reported profits on August 8th. The company recorded a profit of $0.10 per share against a Zacks Consensus Estimate of $0.32. Weak sales performance and a poor replenishment ordering rate at a large mass retail customer, and failure to achieve product repositioning played a role in the short fall. European sales also disappointed.
This maker of beauty products has tumbled from nearly $50/share in May to a current price near $35. The CFO, who had been with the company since 2001, resigned on August 21st to take a job with Hain Celestial Group adding unease to investor confidence. After a long history of posting positive quarterly earnings surprises, the company has missed two out of the past three quarters.
Earnings under pressure:
Earnings estimates have tumbled over the past thirty days. The Zacks Consensus Earnings per Share Estimate has declined from $2.81 to $2.19 for the fiscal year ending June 2014 and from $3.39 to $2.59 for the fiscal year ending June 2015. Gross margin has also been under pressure in recent quarters falling from 49.2% in the June quarter of 2012 to 46.77% in the June quarter of 2013.
Elizabeth Arden is priced at a PEG ratio of 1.22 which is near the 10 year median. Although the company has seen earnings estimates fall sharply, the valuation is about in line with the historical average. Likewise, the price to sales ratio is 0.8 and above the 10 year median of 0.6.
Those looking to play the beauty space may want to look at Inter Parfums (IPAR). This perfume company is a Zacks Rank #1 (Strong Buy), and has seen its earnings estimate revisions work higher over the past 30 days. The Zacks 2013 and 2014 Earnings per Share Consensus Estimates have risen $.02 to $1.24 and $.01 to $1.11 respectively over the past thirty days. Its price to sales ratio of 1.3 is closer to its 10 year median at 1.2, although it is priced for rapid growth with a PEG ratio of 1.96 against a 10 year median of 1.32.
Nu Skin (NUS), Zacks Rank #1 (Strong Buy), is another alternative to Elizabeth Arden. Earnings estimates have been steady over the past thirty days, but are up sharply over the last sixty. The Zacks Consensus Earnings per Share Estimate for 2013 has risen $0.85 to $5.15, while the 2014 estimate has jumped $0.91 to $5.77. The PEG ratio is 0.96 against a 10 year median of 1.31. It is selling below its growth rate and cheap to its 10 year median. However, its price to sales ratio is elevated at 2.3 compared to a 10 year median of 1.2.
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