Sally Beauty's Disappointing Earnings Report Provides Entry Point For Patient Investors

On Thursday morning, Sally Beauty Holdings, Inc. SBH reported Q3 adjusted earning per share of $0.47, which was inline with estimates while reporting revenues of $998 million vs. estimates of $1.01 billion.

Baird's Mark Altschwager, like many investors, was mostly disappointed with Sally Beauty performance. The analyst did admit, however, the recent sharp selloff "reflects a slower growth scenario - presenting opportunity for patient investors."

Despite Sally Beauty's disappointment, Altschwager maintained his Outperform rating, but lowered the company's price target from $34.00 to $32.00.

Sally Beauty's Changes Has Spooked Investors

"Management has made significant changes to packaging, pricing, marketing, and stores over the past year but comps are moving in the wrong direction–results that have shaken investor confidence in longer-term guidance for the Sally segment," stated Atschwager.

The analyst expected after analyzing Q3 results a "more modest" FY2017 outlook issued by Sally management next quarter.

"While disappointed with the recent deceleration, we're somewhat relieved to hear a more conservative outlook as persistently optimistic comp guidance has fueled stock volatility, in our view," stated Altschwager.