Will these personal products stocks beat revenue estimates this month?


By Mary-Lynn Cesar for Kapitall.

Weak consumer spending in the US brought down L'Oreal's (OTCMKTS: LRLCY) sales in the second quarter, causing the beauty giant to miss the average analyst revenue estimate. The French company reported a 4.1% increase in like-for-like revenue last week, which was up from the 3.5% seen in the previous quarter but short of the 4.4% estimate.

North America sales rose 2.8%, outpeforming the region's first-quarter 1.2% growth but missing the 3.2% forecasted by analysts. Per Bloomberg , L'Oreal's shares rose 0.8% in early trading following the earnings release. 

On Monday morning, a different kind of consumer goods company beat revenue estimates, but instead of seeing a rise in shares, Michael Kors's ( KORS ) stock price fell . The luxury apparel and accessories brand released its first-quarter earnings this morning, reporting $919.2 million in revenue and earnings of $0.91 per share compared to estimates of $851.7 million in revenue and earnings of $0.81 per share. Yet rising costs, declining margins , and a significant increase in markdowns made investors nervous, sending the stock down 5.57 points or 6.81% as of 11:50 AM EST.

The two different market reactions inspired us to take a closer look at personal products stocks' revenue in the following list. We chose that industry because of the difficulty L'Oreal has encountered in selling its products in North America over the first half of the year, which is a challenge that could also impact revenue growth of other companies in the industry. 

To begin, we created a group comprised of personal products stocks reporting earnings this month . We then screened that group for stocks with revenue estimates for the to-be-reported quarter that are greater than revenue reported a year ago . This eliminated all of the companies that analysts expect to see a drop in sales.

Investor response to Michael Kors's weakening margins led us to screen for stocks with gross margins higher than the industry average on most recent quarter (MRQ), annualized and trailing twelve month ( TTM ) bases . Gross margin, which is expressed as a percentage, shows how much profit a company earns off each dollar it makes in sales, after subtracting production expenses. Operating costs, payroll, and taxes are all examples of production expenses. 

Gross margin is calculated by dividing gross profit by revenue. And the higher the percentage, the more profit a company retains from its revenue. 

We were left with two personal products stocks on our list. Do you think these companies will beat their revenue estimates while maintaining above-average gross margins? Use this list as a starting point for your own analysis, and let us know what you think in the comments. 

Click on the interactive chart to view data over time. 

1. Estee Lauder Companies Inc. ( EL , Earnings , Analysts , Financials ): Engages in the manufacture, marketing, and sale of skin care, makeup, fragrance, and hair care products worldwide. Market cap at $26.37B, most recent closing price at $67.90. The average analyst estimate for Estee Lauder's fourth-quarter revenue is $2.66 billion. The company reported $2.41 billion in revenue a year ago. Estee Lauder's year-over-year revenue grew by 11.26% in the third quarter of fiscal year 2014 vs. an industry average of 8.82% growth. On a TTM basis, the company's revenue has grown by 6.22% vs. an industry average of 8.51%. MRQ gross margin at 84.25% vs. an industry average of 74.87%. TTM gross margin at 83.81% vs. an industry average of 73.68%. Estée Lauder will report its fourth-quarter fiscal year 2014 earnings on Friday, August 15th.

2. Nu Skin Enterprises Inc. ( NUS , Earnings , Analysts , Financials ): Develops and distributes anti-aging personal care products and nutritional supplements worldwide. Market cap at $4.93B, most recent closing price at $84.0. The average analyst estimate for Nu Skin's second-quarter revenue is $709.03 million. The company reported $682.93 million in revenue a year ago. Nu Skin's year-over-year revenue grew by 23.91% in the first quarter of 2014 vs. an industry average of 8.82% growth. On a TTM basis, the company's revenue has grown by47.02% vs. an industry average of 8.51%. MRQ gross margin at 85.93% vs. an industry average of 74.87%. TTM gross margin at 85.40% vs. an industry average of 73.68%. Nu Skin will reports it second-quarter earnings on Wednesday, August 6th.

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: TTM



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