Revlon, Inc. :REV-US: Earnings Analysis: Q3, 2016 By the Numbers : November 16, 2016

Revlon, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Revlon, Inc. – Avon Products, Inc., Estee Lauder Companies Inc. Class A, Inter Parfums, Inc., Nu Skin Enterprises, Inc. Class A, Edgewell Personal Care Co., Procter & Gamble Company, Coty Inc. Class A and CCA Industries, Inc. (AVP-US, EL-US, IPAR-US, NUS-US, EPC-US, PG-US, COTY-US and CAW-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 604.80 million, Net Earnings of USD -4.50 million.
  • Gross margins narrowed from 64.43% to 59.76% compared to the same period last year, operating (EBITDA) margins now 17.28% from 18.18%.
  • Year-on-year change in operating cash flow of -219.61% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 604.8 488.9 439.6 521.9 471.5
Revenue Growth (%YOY) 28.27 1.35 0.25 4.17 -0.17
Earnings (mil) -4.5 10.8 10.6 26.2 7.9
Earnings Growth (%YOY) -156.96 -58.46 1425 1039.13 -44.37
Net Margin (%) -0.74 2.21 2.41 5.02 1.68
EPS -0.09 0.16 0.21 0.47 0.12
Return on Equity (%) N/A N/A N/A N/A N/A
Return on Assets (%) -0.72 2.27 2.17 5.32 1.64

Access our Ratings and Scores for Revlon, Inc.

Market Share Versus Profits

Revenues History
Earnings History

REV-US‘s change in revenue this period compared to the same period last year of 28.27% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that REV-US is holding onto its market share. Also, for comparison purposes, revenues changed by 23.71% and earnings by -141.67% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 64.43% to 59.76%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 18.18% to 17.28% in this time frame. For comparison, gross margins were 64.92% and EBITDA margins were 17.32% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

REV-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 56.69 days from 63.35 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

REV-US‘s change in operating cash flow of -219.61% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 12.66% to 12.52% and (2) one-time items that contributed to a decrease in pretax margins from 6.89% to -0.81%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Revlon, Inc.

Company Profile

Revlon, Inc. manufactures, markets and sells beauty and personal care products. The company’s products include cosmetics, hair color, hair care and hair treatments, beauty tools, men’s grooming products, anti-perspirant deodorants, fragrances, skincare and other beauty care products. It operates its business through the following segments: consumer segment, professional segment and other segment. The Consumer segment is comprised of products that are manufactured, marketed and sold primarily within the mass retail channel in the U.S. and internationally, as well as certain department stores and other specialty stores outside the U.S., under brands such as Revlon, Almay, SinfulColors and Pure Ice in cosmetics; Revlon ColorSilk in women’s hair color; Revlon in beauty tools; and Mitchum in anti-perspirant deodorants. The Professional segment manufactures, markets and sells professional products primarily to hair and nail salons and distributors in the U.S. and internationally under brands such as Revlon Professional in hair color, hair care and hair treatments; CND in nail polishes and enhancements, including CND Shellac and CND Vinylux nail polishes; and American Crew in men’s grooming products. The Other segment includes the operating results of the CBB business and related purchase accounting for the CBB Acquisition. Revlon was founded by Charles Revson, Joseph Revson, and Charles Lachman in March 1932 and is headquartered in New York, NY.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of REV-US.