Weekly Beauty And Personal Care Notes: L’Oréal, Estée Lauder, Revlon And Avon

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The beauty and personal care players witnessed an eventful week, marked by strategic alliances and legal settlements. L’Oréal (OTC:LRLCY) and Estée Lauder (NYSE:EL) acquired companies to enhance their portfolios, and Revlon (NYSE:REV) vouched to ban certain harmful chemicals from its products. Also, while Avon Products (NYSE:AVP) admitted to bribery charges in China and agreed to pay $135 million as a settlement, L’Oréal stated that it will appeal the charges brought against it by French anti-trust regulators.

Below, we give a quick rundown on the most notable events in the last week related to these companies.

See Our Complete Analysis for These Companies Here

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L’Oréal

L’Oréal was one of the 11 companies charged with a total fine of €951.2 million ($1.17 billion) by French anti-trust authorities, over price rigging allegations of certain consumer products. Two separate penalties were issued for cleaning products and personal hygiene items. L’Oréal has been slapped with the largest fine of €189.5 million, the Authorite de la Concurrence said in an e-mailed statement. [1] On December 18, L’Oréal issued a press release stating that it will appeal the decision (See press release).

On December 17, L’Oréal announced the acquisition of Coloright, an Israel based start-up developing hair fibre optical reader technology. As a result of this deal, Coloright will be incorporated into L’Oréal’s international Research and Innovation network, but will continue being managed by its current CEO, Mr Sagiv Lustig (see press release).

Our price estimate of $37 for L’Oréal is around 9% above the current market price. Our full FY14 revenue estimate stands at approximately $32 billion, compared to a consensus estimate of $28 billion. L’Oréal’s stock price experienced a rise of  2% over the week through Friday.

Estée Lauder

On December 19, Estée Lauder announced that it signed an agreement to acquire GLAMGLOW, a premium skincare brand which is famous for its facial mask treatments. The deal is expected to be completed by January 2015. The GLAMGLOW brand will be overseen by John Demsey, The Estée Lauder Companies Group President, who also oversees other brands such as, Estée Lauder, M·A·C, Tom Ford, and Bobbi Brown to name a few (see press release). Currently, Estée Lauder seems to be in an acquisition spree. Over the past couple of months it acquired RODIN olio lusso-a luxury skin care brand, and fragrance brands like Editions de Parfums Frédéric Malle and Le Labo.

Estée Lauder experienced a number of insider trading activities last week. (View all the transactions here). The most notable among those was VP Sara E. Moss selling 4,288 shares of the company’s stock in a transaction dated Thursday, December 18th. The average price of the shares sold were $75.03, with the total value amounting to $321,729. Following the transaction, the vice president owns 73,293 shares of the company’s stock, valued at approximately $5,499,174. (View SEC filing) [2]

We have a price estimate of $85 for Estée Lauder, about 12% higher than its current market price. Our full CY14 (ending December 2014) revenue estimate stands at approximately $10.8 billion, compared to a consensus FY15 (ending June 2015) estimate of $10.9 billion. We expect non-GAAP earnings per share of $2.69 this fiscal year, compared to consensus estimates of $3.06. Estée Lauder’s stock price experienced a rise of  4% over the week through Friday.

Revlon

On December 18, Revlon announced the removal of some toxic ingredients, namely two long-chain parabens and a formaldehyde-releasing chemical, from its products. Long chain parabens are suspected to cause endocrine disruption, while formaldehyde is linked to cancer. The action taken was in response to a petition, organized by the non-profit body Environmental Working Group, which was signed by more than 100,000 people. [3]

We have a price estimate of $ 33 for Revlon, which is at a 6% discount to the current market price. Our full FY14 revenue estimate stands at approximately $1.93 billion, compared to a consensus FY14 estimate of $1.95 billion. Revlon’s stock price experienced a rise of  7% over the week through Friday.

Avon Products

Avon Products’ will pay a fine of $135 million to settle US charges of bribery against its China unit. Avon pleaded guilty to hiding $8 million in gifts, which its employees gifted to Chinese officials, over a period of four years starting from 2004. Avon also admitted to hiding cash, non-business meals, travel and entertainment it provided to obtain business benefits. [4] (View SEC filing)

We have a price estimate of $11 for Avon Products, about 10% higher than the current market price. Our full FY14 revenue estimate stands at approximately $9.5 billion, compared to a consensus FY14 estimate of $8.9 billion. Avon’s stock price experienced a slight decline of 0.38% over the week through Friday.

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Notes:
  1. L’Oreal, Unilever Fined $1.2 Billion by French Antitrust Arm, Bloomberg, December 2014 []
  2. Insider Selling: Estee Lauder Companies VP Sells 4,288 Shares of Stock (EL), Mideast Times, December 2014 []
  3. Revlon Removes Some Dangerous Chemicals From Its Products, TIME Magazine, December 2014 []
  4. Avon Settles China Bribery Case For $135m, Yahoo! Finance, December 2014 []