Why Luxottica (LUX) Stock Is Lower Today

NEW YORK (TheStreet) -- Shares of Luxottica Group  (LUX) are down -0.56% to $51.50 in pre-market trade after it was reported that the major eye wear maker said it will discuss the possible departure of CEO Andrea Guerra at its next board meeting, as the likelihood of the executive leaving his post grows, the Wall Street Journal reports.

Mr. Guerra, who has more than doubled profits and revenue in almost 10 years, and helped bring the company to a global scale, has had disagreements with founder, chairman and largest shareholder Leonardo Del Vecchio over the company's management, the Journal added.

TheStreet Ratings team rates LUXOTTICA GROUP SPA as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate LUXOTTICA GROUP SPA (LUX) 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 growth in earnings per share, increase in net income, revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. 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:

  • LUXOTTICA GROUP SPA has improved earnings per share by 13.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LUXOTTICA GROUP SPA increased its bottom line by earning $1.58 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($1.92 versus $1.58).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry average. The net income increased by 15.0% when compared to the same quarter one year prior, going from $278.85 million to $320.64 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 5.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for LUXOTTICA GROUP SPA is rather high; currently it is at 64.81%. Regardless of LUX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LUX's net profit margin of 11.43% compares favorably to the industry average.
  • LUX's debt-to-equity ratio of 0.60 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 1.16 is sturdy.
  • You can view the full analysis from the report here: LUX Ratings Report
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