Why Revlon Shares Sparkled

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of cosmetics-specialist Revlon were looking stunning today, jumping 18% after crushing earnings estimates.

So what: Net income moved up 28%, helped by stronger sales in the U.S. and Latin America, but European sales remained weak, falling by 10%. The 15% jump in revenue from the Americas more than made up for it, however. Overall sales increased 9%, aided by the acquisition of Pure Ice, and earnings per share of $0.89 soared past estimates of just $0.73. CEO Allan Ennis said the top-line growth reflects the effectiveness of the company's strategy, which is based on building strong brands and pursuing growth opportunities around the globe.

Now what: The sales increase in the fourth quarter was driven primarily by growth in Revlon color cosmetics and ColorSilk hair color, and since makeup is a discretionary expense, sales tend to be economically sensitive. With the improving economy in the U.S., sales should continue to improve and counteract the slump in Europe. Today's jump may look exaggerated, but the fourth quarter is the most important in the cosmetics industry and delivered more than half of Revlon's earnings for the year. Shares still look affordable, even after the 18% gain.

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The article Why Revlon Shares Sparkled originally appeared on Fool.com.

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