Ah, my old buddy Revlon, Inc (NYSE: REV)! Actually, that exclamatory statement is full of sarcasm. Revlon, a beauty-products business whose colleagues include Avon Products, Inc. (NYSE: AVP) and The Estee Lauder Companies Inc. (NYSE: EL), is not a buddy of mine. It is a stock that I really have no intention of buying. The company isn't exactly the most attractive one out there at the moment in terms of fundamentals, but it did have a decent cash-flow statement in the third quarter. Let's check out some numbers.
To begin with, revenues didn't see much growth, as they rose about 1%. Reported net income was $0.57 per diluted share versus a net loss of $0.20 per diluted share in the year-ago period. Unfortunately, that doesn't tell the whole tale. You have to strip out a one-time gain from discontinued operations to get the full story. And you're not going to like it once you do. So, the loss from continuing operations becomes $0.30 per diluted share, which was $0.06 wider than the loss in Q3 2007. Yet, the cash-flow statement does offer a bright spot. Positive operational cash flow of almost $44 million was booked over the last nine months. Last year, Revlon used almost $50 million to fund operations over the nine-month period. Some changes in working capital helped out.
Well, even with the better cash-flow scenario, no, I'm not buying the stock. Revlon is still, in my opinion, a long way off from becoming a great investment idea. I'll need to see more robust growth in the top line and a better profit picture. Sure, for the nine-month period, Revlon did generate a profit of $0.04 per diluted share, but I'm still not convinced. As of this writing, the stock was down 23%. I know it's a bad day in the markets and all, but I wouldn't want to align myself with a company that sees that kind of reaction to earnings. Such a pullback doesn't scream value to me when it comes to Revlon.
Disclosure: I don't own any company mentioned; positions can change at any time.
Estee Lauder (NYSE: EL), whose colleagues include Avon Products (NYSE: AVP) and Revlon (NYSE: REV), ended the week on a great note. The stock rallied to a new 52-week high of $52.04 on Friday during the intraday session, and closed only several cents below that price at the end of the day. The catalyst for this stellar stock performance can be traced to the beauty company's earnings report, which was released earlier in the week.
According to SmartMoney, Estee Lauder saw top-line growth of 14% during the company's fiscal fourth quarter, with revenues coming in at roughly $2 billion. The bottom line increased 36% to $0.61 per share. Wall Street was only counting on $0.56 per share. So that's a nice $0.05 per share beat. The revenue number also went beyond expectations.
I like the results, and I like that Estee Lauder has been a particularly strong stock. According to the AOL Finance snapshot taken at the time of this writing, the stock has been up for every time frame (1-month, 1-year, etc.). Putting this fact together with the fundamental results of the quarter yields a situation that should be looked at. I don't like that gross margins declined, but I do find the stock appealing considering how bad the market has been.
Avon (NYSE: AVP) delivered not a bag of cosmetics to Wall Street, but a batch of growing earnings. Total revenues for the first quarter were up beautifully, rising 14% to $2.5 billion. Earnings per diluted share likewise did the double-digit-increase dance, rocketing 26% to $0.43.
Now, I would have liked the report a lot more if the company had indicated in its cash flow statement that everything was positive -- unfortunately, that was not to be, as operational cash flow was, in fact, negative. Avon needed to use $41 million for its operating activities during the quarter. Well, one thing I can say is that it's a lot less than the cash needed to fund last year's operations -- Avon burned through over $160 million in the comparable period. A check of the latest 10K shows that, while operational cash flow has been decreasing over the last few years, it has remained positive, so since this is the first quarter of the new fiscal year, we can wait to see how cash flow shapes up as the quarters go by.
Avon competes with companies like Procter & Gamble (NYSE: PG), Revlon (NYSE: REV) and Estee Lauder (NYSE: EL). As I've stated in the past, Procter & Gamble is more my kind of consumer-products business, but I'll give Avon its due since it does have a good product portfolio backing its brand and a devoted base of users. The stock is not too far off from its 52-week high as of this writing, and so long as it can keep sales growing and fight inflationary pressures, it should be a decent long-term bet.
Disclosure: I don't own shares in any of the companies mentioned; positions can change at any time.
Revlon (NYSE: REV) issued a press release concerning its plans for a reverse split as well as some preliminary quarterly results. The reverse split will be based on a 1-for-10 ratio. Well, the company may increase the share price via this method, but it won't make much of a difference in terms of Revlon's potential as an investment.
The stock closed on Friday at $0.99 per share. Let me repeat this -- the stock closed on Friday at $0.99. We are thus talking about a highly speculative equity. Interestingly, if you take a look at the preliminary results, you might believe that Revlon is on the right path. Revlon's management expects a slight dip in terms of net revenues -- the top line will see about $320 million in the quarter versus nearly $329 million in the year-ago period. There will be a net loss of about $5 million this time around versus a net loss of over $35 million last year. Doesn't sound so bad, I suppose, especially when you consider that operating income should come in at $30 million -- that's ten times better than 2007's first quarter. So, would I buy Revlon?
No. I actually owned Revlon stock a few years ago, and I think I essentially broke even when I decided to get the heck out. Revlon has a long way to go before proving to me that it's got a handle on all its problems and that it can get its brand equity back on track. And this reverse stock split means nothing to me, as it doesn't alter the underlying fundamentals. Revlon faces tough competition from other brands, such as Avon (NYSE: AVP), Estee Lauder (NYSE: EL), and products from Procter & Gamble (NYSE: PG), so the company has its work cut out for it.
Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.
It would be easy to try to put the blame game on the massively high import prices or the crummy University of Michigan numbers released this morning, but frankly there is no point. Elaine Chao at the Labor Department got a "critic's pass" today because there are more important fish to fry. General Electric Co. (NYSE: GE) was such a disappointment that their quarter could have been a C-Rated low budget slasher film. It really looks like doing the exact opposite of what feels good is the right trade. Below are the unofficial closing levels for major US index levels:
DJIA 12,328.68 (-253.30; -2.01%) S&P 500 1,333.18 (-27.37; -2.01%) NASDAQ 2,290.24 (-61.46; -2.61%) 10YR-TBond 3.471% (-0.061) Major list of 52-week lows
Here are highlights of some other earnings reports from Thursday:
Gap Inc. (NYSE: GPS) reported a 21% increase in its fourth-quarter profit year over year. The $265 million, or 35 cents per share, matched analysts' expectations. Revenue totaled $4.68 billion, down 5% from the previous year.
Kohls Corp. (NYSE: KSS) fourth-quarter profit fell about 15% year over year to $411.7 million, or $1.31 per share, just beating analysts' estimates. Sales rose less than 1% $5.49 billion, but same-store sales fell.
Novell Inc. (NASDAQ: NOVL) swung to a profit in its fiscal first quarter: $16.8 million, or 5 cents per share, matching expectations. Revenue rose to $230.9 million from $218.4 million a year ago.
As the leveraged buyout market (LBO) tightens amid the backdrop of more expensive debt, deal makers are looking to ride new investment vehicles to make their minions money.
We've seen a surge in popularity in what's called a "Special Purpose Acquisition Company," or SPAC. Bloomberg had a good article this morning on advent of the SPAC and what's happening in the industry as a whole. These companies, also called blank-check companies, are IPO'd after raising their funds. Once public, the founding management team needs to make an acquisition in a given time-frame. Shareholders decide on an individual basis whether they like the deal or not. If they like it, great. If not, they tender their shares and receive their money back.
Essentially, it's a hedged bet on management that their industry expertise will lead to a smart acquisition.
Bloomberg says that since the start of 2003, 144 blank-check companies have sold shares, raising $18.1 billion, with 13 of the deals coming before 2005, according to SPAC Analytics.
This post is part of our Money Face-Offs feature. Let us know who you think comes out ahead in this head-to-head match-up, and check out our other Money Face-Off posts.
In this corner, hailing from Beverly Hills and Las Vegas, is 91-year old billionaire investor Kirk Kerkorian, one-time amateur boxer know as "Rifle Right Kerkorian." And in the other corner, hailing from New York, is 71-year-old corporate raider and activist private equity investor, Carl Icahn, who is never afraid to go toe to toe with an opponent.
Let's get ready to rumble.
Round One begins: Kerkorian drops out of school and becomes a pilot. He gets his start in business buying surplus planes after World War II, as well as Las Vegas properties, becoming the landlord of Caesar's Palace. Icahn, meanwhile, establishes his reputation as a corporate raider during his hostile takeover of TWA in 1985, and becomes one of the inspirations for the character of Gordon "Greed Is Good" Gekko, the antagonist of the 1987 film Wall Street.
Revlon (NYSE: REV) is changing hands at $1.15 in early trading. That's up 10%.
The big rise does not keep the cosmetics company from being one of the most mismanaged public companies going.
In the quarter, revenue grew to $349.2 million from $321.1 million. The company's net loss was $11.3 million, or $0.02 per diluted share, compared to a net loss of $87.1 million, or $0.20 per diluted share.
All of the earnings figures were the good news. The company quoted ACNielsen statistics to show that it market share was down across most of its brands.
Because the company did a bit better than expected, its share are getting a bit of a goose.
Over the last five years, Revlon's share price is down 70%. The shareholders are probably out of sorts, but let them eat lipstick.
Going into today's first quarter announcement, analysts had been expecting to see the company show a quarterly loss of 7 cents per share -- what Revlon wound up with. This is exactly the sort of news the cosmetic giant has been needing lately, and Wall Street is definitely rewarding it in early morning trading. With a little over an hour to go before today's opening bell, the stock has been pushed up 8.4% by pre-market traders.
While we never like to see a company show a loss, Revlon has been in the middle of a restructuring program that does seem to be having a positive effect, and that is what is really going to give traders a reason to buy up the stock today. The company was able to lower its overall costs during the quarter while at the same time increase its overall sales. Compared to the first quarter last year when Revlon showed a loss of $58.2 million, this current quarters loss of $35.2 million is a nice improvement.
Companies start to believe their own PR hype. Investors push a stock past logical limits. A company seems about to break down or break out. These are just a few things that can signal a stock with attitude. And... that attitude can be good or bad for the stock price, since attitude always catches up with reality. At least on Wall Street, that is.
Colgate-Palmolive Co. (NYSE:CL) was up $0.71 (1.06%) yesterday to close at $67.42 on about three times its average volume. Investors bid up the stock after a solid earnings report before the open. The technicals for CL have been weakening lately but a continuation of the last two day's advances could change that. The company has an S&P 5 STAR (out of 5) strong buy rating. Out of the 14 other analysts who cover the stock, five give it a strong buy, one a moderate buy, and eight give it a hold. No sell ratings could be a good indicator for CL.
Jim Cramer, never one to rest on a single industry segment, discussed the quest for youthfulness tonight on his ever-popular MAD MONEY show.
If you want your body to look like a teenager's but your bank balance to scream "old fogey," Cramer advises that you avoid Bare Escentuals, Inc. (NASDAQ:BARE). He calls it a fad that isn't going anywhere, and says if you own it you should "ring the register." It was spun off by an LBO firm, but now it's too late; the company won't make you money. Cramer had regrets over this one: he didn't tell a caller on Friday to sell, and wished he had.
Better options if you want to capitalize on America's quest for eternal youth? Cramer likes Allergan, Inc. (NYSE:AGN) for its Botox and Medicis Pharmaceutical Corporation (NYSE:MRX) for its competing product. He counselled against the big, luxury names in the space: Avon Products Group (AVP), The Estee Lauder Co. (NYSE:EL) or Revlon, Inc. (NYSE:REV). Cosmetic companies are unreliable to Cramer.
Cramer did say International Flavors & Fragrances Inc. (NYSE:IFF) is a good alternative, even though it is close to a 52-week high. He thinks the company is much better with scents and steady end markets. Soon it will split into two businesses, he says, as it creates sweet ingredients that it sells to large companies like P&G. He said IFF only trades at 16x forward earnings and it has consistent 10% earnings growth. The best pick of the bunch? IFF, Cramer says.
In this corner, hailing from Beverly Hills and Las Vegas, is 91-year old billionaire investor 
Yesterday I wrote an 
Jim Cramer, never one to rest on a single industry segment, discussed the quest for youthfulness tonight on his ever-popular MAD MONEY show.
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