Why Elizabeth Arden (RDEN) Isn't Looking Too Pretty on Friday

NEW YORK (TheStreet) -- Elizabeth Arden (RDEN) shares are in free-fall after warning of a less-than-attractive December quarter.

By late afternoon, shares had plummeted 17.2% to $28.57.

The cosmetics giant said it expects adjusted second-quarter net income for the period ended December between $1.05 and $1.08 a share on revenue in the range of $415 million to $418 million. Analysts surveyed by Yahoo! Finance had previously had consensus of $1.47 a share in net income on $467.79 million in revenue.

"Our second quarter results will be below our prior expectations primarily due to lower than anticipated net sales. Our results were significantly impacted by an increased level of highly promotional and discounted activity globally and weaker-than-anticipated holiday retail sales and replenishment orders at a number of our non-prestige retail accounts in North America," said CEO E. Scott Beattie in a statement.

For fiscal 2014, the company expects sales growth in the 3-5% range and net income between $2.15 to $2.30 a share. The earnings guidance exceeds analyst consensus of $2.14 a share.

The Miramar, Florida-based business is due to release second-quarter results on Feb. 5.

Several of the company's competitors have dipped in sympathy. Revlon (REV) has taken off 3.6% to $23.66 and Avon Products (AVP) shed 2.8% to $16.29. 

TheStreet Ratings team rates ELIZABETH ARDEN INC as a Buy with a ratings score of B-. The team has this to say about their recommendation:

"We rate ELIZABETH ARDEN INC (RDEN) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has slightly increased to -$130.66 million or 7.50% when compared to the same quarter last year. Despite an increase in cash flow of 7.50%, ELIZABETH ARDEN INC is still growing at a significantly lower rate than the industry average of 778.69%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 0.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • RDEN's debt-to-equity ratio of 0.94 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.75 is weak.
  • ELIZABETH ARDEN INC's earnings per share declined by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ELIZABETH ARDEN INC reported lower earnings of $1.33 versus $1.92 in the prior year. This year, the market expects an improvement in earnings ($2.16 versus $1.33).

TheStreet Ratings team rates LAUDER (ESTEE) COS INC as a Buy with a ratings score of A+. The team has this to say about their recommendation:

"We rate LAUDER (ESTEE) COS INC (EL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • EL's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 4.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for LAUDER (ESTEE) COS INC is currently very high, coming in at 83.04%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.24% is above that of the industry average.
  • LAUDER (ESTEE) COS INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LAUDER (ESTEE) COS INC increased its bottom line by earning $2.58 versus $2.16 in the prior year. This year, the market expects an improvement in earnings ($2.88 versus $2.58).
  • The net income growth from the same quarter one year ago has exceeded that of the Personal Products industry average, but is less than that of the S&P 500. The net income increased by 0.4% when compared to the same quarter one year prior, going from $299.50 million to $300.70 million.

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