1Q16 earnings highlights
Like revenue, beauty companies’ calendar 1Q16 earnings gave out mixed signals to investors. While Coty’s (COTY) reported earnings per share (or EPS) fell in 1Q16, Estée Lauder (EL) and Procter & Gamble (PG) came in ahead of the consensus Wall Street analyst estimates on earnings yet again. Avon (AVP) missed earnings estimates by $0.07 per share in 1Q16.
Factors that affected earnings
Coty’s adjusted diluted EPS (or earnings per share) fell 50.0% to $0.09 compared to $0.18 in the corresponding quarter last year. However, in the first nine months of fiscal 2016, EPS rose 19% to $1.08 compared to $0.91 in the prior year. The EPS increase was boosted by a favorable tax settlement of $0.1 billion this fiscal year compared to a $0.03 billion settlement in the prior year.
For Estée Lauder (EL), diluted net earnings per share rose 4% to $0.76. However, before charges and the impact of foreign currency translations, diluted net earnings per share rose 5% to $0.73. The increase rose due to the By Kilian acquisition, which contributed approximately ten basis points of this sales growth.
Similarly, Procter & Gamble’s reported diluted net earnings per share rose 29% to $0.97 while core earnings fell 3% to $0.86 per share in fiscal 3Q16. The increase in diluted earnings was primarily driven by the impact of discontinued operations and impairment charges related to the batteries business in the base period.
Despite the economic instability, Coty expects EPS growth to be substantially higher because of a huge return on one-off tax benefits. Estée Lauder expects diluted earnings to be in the range of $3.09 to $3.14, which is $0.02 higher than the range in its previous guidance. This includes a ~$0.27 currency impact and ~$0.05 due to dilution from acquisitions.
PG and EL together make up 2.1% of the PowerShares S&P 500 ex-Rate Sensitive Low Volatility Portfolio ETF (XRLV).[1. Updated as on July 13, 2016]
In the coming parts of the series, we’ll discuss beauty companies’ acquisition spree and how important the online channel has become for these companies.