L'Oreal Rises in Paris as New Markets Help Sales Beat Estimates
Comment of the Day

April 19 2013

Commentary by Eoin Treacy

L'Oreal Rises in Paris as New Markets Help Sales Beat Estimates

This article by Andrew Roberts and Julie Cruz for Bloomberg may be of interest to subscribers. Here is a section
“We're pretty happy with the growth acceleration in Brazil,” Agon told analysts. “We are back to growth that's probably a little bit over the market.”

L'Oreal's active cosmetics unit, which sells the Vichy and La Roche-Posay brands, posted revenue growth of 6.2 percent, while sales at the consumer-products unit gained 5.5 percent.
Revenue at Body Shop rose 0.8 percent.

“The key question is: With the most difficult comparative of the year out of the way, particularly in Asia, can growth accelerate in the rest of the year?” Eamonn Ferry, an analyst at Exane BNP Paribas in London, said by e-mail.

Eoin Treacy's view

My view – L'Oreal is an S&P Europe 350 Dividend Aristocrat and yields 1.8%. The company is the world's largest cosmetics company and generated 35% of revenue from outside Western Europe and North America in 2012. This Rest of the World grouping is also the company's fastest growing segment. Cosmetics are the type of product that once people begin to consumer them, they seldom give them up and also develop a high degree of brand loyalty.

The share hit a peak near €130 three weeks ago and found support today in the region of €120. While still somewhat overextended relative to the 200-day MA, a sustained move below this week's low would be required to question potential for additional higher to lateral ranging. The fact that L'Oreal is trading at a forward P/E of 24.66 which is relatively expensive compared to the wider market, may act to slow what has been an impressive advance of the last year.

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