Elizabeth Arden Surges on 2Q Results
Friday February 2, 11:52 am ET
Elizabeth Arden Shares Jump on 2nd-Quarter Financial Results, Analyst Upgrade
NEW YORK (AP) -- Shares of Elizabeth Arden Inc. ticked higher on Friday, a day after the skin care and cosmetics maker posted a fiscal second-quarter profit well above Wall Street expectations and as an analyst upgraded the stock.
The company said Thursday quarterly net income declined 22 percent, but excluding restructuring charges its per-share earnings of 92 cents trumped analysts' consensus target by 10 cents per share.
On Friday, SunTrust Robinson Humphrey analyst William Chappell called its second-quarter results "solid" and predicted troubles the company faced in 2006 could fade in 2007.
Specifically Wal-Mart, Elizabeth Arden's largest customer, decided to reduce inventory levels across all of its product categories in 2006, Chappell said, but now that its been a year, year-ago comparisons should ease.
Federated Department Stores' acquisition of rival department store May Co. has hurt the company since Federated started closing duplicate May locations, cutting Elizabeth Arden's sales base. Now the transition is mainly complete and there will be less impact on the company going forward, he predicted.
Finally, Elizabeth Arden acquired two companies, Riviera and Sovereign, in 2006, which will begin to boost earnings by the fourth quarter.
"Elizabeth Arden's stock struggled through 2006 due to Wal-Mart inventory de-stock issues, pressures from the Federated/May merger and the impact of two dilutive acquisitions," Chappell wrote in a note to investors. "However, we now see these challenges as opportunities for upside to our earnings estimates in coming quarters."
He raised his 2007 earnings estimate by 2 cents to $1.18 per share and upgraded the company to "Buy" from "Neutral." The analyst also set a $27 price target on the stock, which implies growth of 39.5 percent over its closing price Thursday of $19.35.
Shares surged $1.40, or 7.4 percent, to $20.75 during midday trading on the Nasdaq. The stock has traded between $13.63 and $24.58 during the past 52 weeks.
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