Why Elizabeth Arden (RDEN) Stock Is Plunging Today

NEW YORK (TheStreet) -- Shares of Elizabeth Arden Inc.  (RDEN) are dropping -17.9% to $22.18 on Thursday as South Korea's LG Household & Health Care Ltd said it is no longer interested in acquiring the U.S. cosmetics firm. Elizabeth Arden announced this week it would embark on extensive restructuring due to mounting losses, according to Reuters.

LG Household said it would move on to look at other opportunities that offered better value but declined to elaborate.

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Separately, TheStreet Ratings team rates ELIZABETH ARDEN INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate ELIZABETH ARDEN INC (RDEN) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income."

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

  • The debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
  • 44.32% is the gross profit margin for ELIZABETH ARDEN INC which we consider to be strong. Regardless of RDEN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RDEN's net profit margin of -12.54% significantly underperformed when compared to the industry average.
  • ELIZABETH ARDEN INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, ELIZABETH ARDEN INC reported lower earnings of $1.33 versus $1.92 in the prior year. For the next year, the market is expecting a contraction of 91.7% in earnings ($0.11 versus $1.33).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Personal Products industry. The net income has significantly decreased by 1977.2% when compared to the same quarter one year ago, falling from -$1.27 million to -$26.44 million.
  • You can view the full analysis from the report here: RDEN Ratings Report
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