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Is Beauty No Longer a Priority? EL, AVP & REV Trading Down Today

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Are the days of "blushing" beauties over and done with? According to earnings reported by cosmetic companies as of late, the answer is yes. Revlon (NYSE: REV) watched sales drop $1.5 million in the U.S. in Q1, while Estee Lauder (NYSE: EL) reported negative top-line results for fragrance and Avon (NYSE: AVP) informed the masses of a wide margin miss. The consecutive disappointments have left many to wonder: what's the deal?

Well, Physicians Formula Holdings (NASDAQ: FACE) may know a thing or two about where the ladies have flocked to pick up their powders and concealers. The cosmetic distributor stole the show with what seems to be a vengeance, as it brushed its 24% sales increase in the face of the flailing competition.

As one of the only beautifying stocks trading positively today, FACE is not letting the good news go straight to its coiffed head.

"The momentum the company generated towards the end of 2011 through its comprehensive advertising campaign and the launch of their skin care line has certainly carried into 2012. As well, FACE will soon begin negotiations with retailers for 2013 and expects to be able to leverage their success this quarter into incremental distribution for 2013," Citi said in research report yesterday.

This is not to say that the company no longer has to try to be successful. FACE may want to apply some waterproof mascara, as mixed guidance from the likes of EL and AVP show that there may be a couple turnarounds in the near future.

Estee Lauder actually reported a decent quarter, (despite how it is faring in the market currently), one that has amplified investor confidence in the brand. The company increased F12 EPS projections, as it is now expected to be at $2.21-$2.26 vs. $2.16-$2.23 prior. Sales were up and healthy gross margin expansion was evident.

It is surprising that EL is doing so poorly in comparison to FACE, as the cosmetic distributor reported such admirable results. With summer looming and women seeking flawless, tanned complexions, it may be that traders are leaning towards Physician Formula's products because the company's main expertise lies in color correction. Imperfections are often hard to fix, but FACE guarantees an immaculate glow for females of all ages.

Another company that promises to keep its ladies looking gorgeous has been struggling for a while now. Avon once again shelled out a large Q1 EPS miss and forced many research firms to lose complete hope in the brand as whole. However, not everyone has given up. Though it may be a stretch, AVP could turn its bad luck around, according to Deutsche Bank.

"With uncertainty around potential corporate actions and new management's turnaround strategy, underlying fundamentals remain a side show. Either way, we see significant latent growth and earnings potential here, careful not to dismiss a global direct selling model that has proven its viability over time. While few short-term catalysts outside M&A exist, beauty is a good business and geographic footprint is enviable," the firm stated earlier this week.

For now, AVP looks as though it may continue to flounder, leaving FACE with nothing to fear at the moment. However, the company may not want to get too comfortable, as those who are struggling on the sidelines may rear up and surprise in the coming quarters.

FACE is currently trading at $3.62, up +17.1% for the day. Comparatively, AVP is trading at $20.32, down -3.24% for the day. REV is trading at $15.26, down -4.68% today and EL is trading at $60.61, down -5.52%.

Latest Ratings for REV

Sep 2017JefferiesInitiates Coverage OnHold
Mar 2015BMO CapitalMaintainsMarket Perform
Oct 2013BMO CapitalDowngradesOutperformMarket Perform

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Posted-In: CitiAnalyst Color Earnings News Retail Sales Topics Analyst Ratings General Best of Benzinga


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