Zacks Investment Research downgraded Elizabeth Arden, Inc. (RDEN) to a Zacks Rank #5 (Strong Sell) on Aug 13, following dismal fourth-quarter and fiscal 2013 results announced last week.
Why the Downgrade?
Elizabeth Arden has witnessed sharp downward estimate revisions after reporting lower-than-expected fourth quarter and fiscal 2013 results. Shares of this makeup and skin care company crashed after the announcement and given its weak outlook for the upcoming fiscal year it has more downside left.
On Aug 8, Elizabeth Arden reported fiscal fourth-quarter earnings per share of 10 cents, missing the Zacks Consensus Estimate by 68.8% and the year-ago earnings by 64.3% due to lower revenues and poor margins. Revenues rose only 0.8% to $267.9 million and missed the Zacks Consensus Estimate of $289 million.
The fiscal 2013 earnings and revenues also missed the Zacks Consensus Estimates and fell short of the company’s expectations. The company’s growth expectations for the Elizabeth Arden brand – one of the most widely recognized beauty brands in the world – proved to be too optimistic leading the company to perform below expectations in the year. Additionally, lower-than-expected orders from one of the largest North American mass retail customers and a weak performance in Europe, especially in the U.K., pulled down revenues in both fourth quarter and fiscal 2013.
In addition, Elizabeth Arden issued a relatively weak outlook for fiscal 2014. For full year 2014, sales are expected to grow between 3.0% and 5.0% year over year, much lower than the growth seen in fiscal 2013. Earnings are expected in the range of $2.15 to $2.30, representing approximately 4% growth at the mid-point.
The Zacks Consensus Estimate for 2014 decreased a sharp 22.1% to $2.19 per share over the last 7 days as all the estimates were revised downwards. Estimates for fiscal 2015 went down 23.6% over the same timeframe.
Other Stocks to Consider
Other companies in the cosmetics industry that are currently doing well include Inter Parfums Inc. (IPAR), Nu Skin Enterprises Inc. (NUS) and Helen of Troy Limited (HELE). While IPAR and NUS carry a Zacks Rank #1 (Strong Buy), HELE holds a Zacks Rank #2 (Buy).
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