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Elizabeth Arden

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Shares of Elizabeth Arden, Inc. (RDEN) recently hit a new all-time high after reporting solid fiscal fourth quarter results, which included a 40.0% earnings surprise. In fact, this makeup and skin care company has beaten Zacks Consensus Estimates for seven straight quarters with an impressive average earnings surprise of 51.1%.

Elizabeth Arden became a Zacks #1 Rank (Strong Buy) stock on August 11, 2012. With an encouraging outlook for the first quarter and fiscal 2013, this company has bright prospects ahead.

Strong Fourth Quarter

On August 9, Elizabeth Arden announced that fiscal fourth quarter (ending June 30) earnings per share of 28 cents easily surpassed the Zacks Consensus Estimate of 20 cents by 40.0%. It also beat the prior year earnings of 18 cents by 56.0%. The improvement was driven largely by higher revenues and better margins.

Revenues rose 4.5% to $265.5 million, marginally surpassing the Zacks Consensus Estimate of $264 million. Excluding currency headwinds, revenues increased 8%. The gross margin expanded 330 basis points to 50.7% in the quarter.

Going forward, the company’s main priorities are to expand international distribution of its fragrance brands, mainly in Europe, and to accelerate growth of its Elizabeth Arden brand – one of the most widely recognized beauty brands in the world. These initiatives, augmented by some recent fragrance brand acquisitions, bode well for healthy sales and margin growth in fiscal 2013.

Impressive Outlook

For the first quarter of fiscal 2013, sales are expected between $330 million and $340 million, representing growth of almost 10% at the mid-point. Adjusted earnings are expected at 0.38 to $0.43.

For full year 2013, sales are expected to grow between 13.5% and 15% year over year. Earnings are seen in the range of $2.55 to $2.70, representing growth of around 27% at the mid-point. Gross margins are also expected to rise 175 to 200 basis points year over year.

Earnings Estimates Rising Sharply

The past 30 days have seen all eight estimates moving upward for fiscal 2013 following the solid outlook provided by the company. As a result, the Zacks Consensus Estimate has gone up by 10.5% to $2.62 in the last 30 days. The Zacks Consensus Estimate for fiscal 2014 has moved higher by about 18.5% to $3.14 over the same time frame.

Expensive Valuation

Elizabeth Arden currently trades at a forward price-to-earnings (P/E) of 17.8x, reflecting a 7% premium to the peer group average of 16.7x. Also, the stock is trading at a premium to the peer group on a price-to-book (P/B) value basis. The P/B multiple of the stock is 2.82, a premium of almost 80% to the peer group average of 1.58x.

However, the stock is trailing at a 12-month return on equity (ROE) of 13.4%, which is the same as its peer group average.

Chart Showing Consistent Rise

Shares of Elizabeth Arden jumped almost 14% and reached a new 52-week high of $47.50 on announcement of solid fourth quarter results. Its shares have been trading mostly above $40 since then. Moreover, the stock is currently trading above its 50- and 200-day moving averages, which stand at $39.26 and $37.00, respectively. In fact, the stock has been consistently trading above its 200-day and 50-day moving averages since mid-June 2012.

Volume is fairly strong, averaging roughly 223K daily. The year-to-date return for the stock is 24.5% compared with 12.76% for the S&P 500 index.

Headquartered in Miramar, Florida, Elizabeth Arden is a leading global marketer and manufacturer of prestige beauty products. The company's products include fragrance brands, skin care and cosmetic brands. Its popular fragrance brands include Elizabeth Arden fragrances like Red Door, Elizabeth Arden green tea, 5th Avenue and celebrity fragrance brands like Elizabeth Taylor's White Diamonds and Passion. The company also makes lifestyle fragrance brands including Curve, PS Fine Cologne and Giorgio Beverly Hills. Its Elizabeth Arden skin care brands include Visible Difference and Ceramides; and there is the Elizabeth Arden cosmetics line. Its market cap is $1.37 billion.

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