Monday, August 10, 2015

Inter Parfums Q2 Earnings Stock Drops 6%

Inter Parfums (IPAR) reported Q2 2015 earnings Friday, August 7th after market close. The company missed Q2 EPS expectations of $0.17, reporting $0.14 diluted earnings per share. The company met analyst revenue expectations of $102 million, but was down from $118.2 million the prior year. Foreign currency exchange rates as well as poor market conditions in Eastern Europe and China can be to blame for the decline in sales. European sales were down to $77.1 million compared to last year’s $94.7 million, representing an 18.5% drop. Better market conditions allowed for increased consumer spending in the US reflecting a 6% rise in sales for the company Y/Y. The positive results from the US portion of the company were unfortunately offset by just about every other geographical segment of IPAR. Overall for the first half of 2015 the company has seen a 4% decrease in sales compared to the first six months of last year. IPAR’s second quarter net income decreased from last years $6.1 million to $4.4 million or on a per diluted share basis last year’s $0.20 to $0.14 EPS.
 Inter Parfums saw a 12% drop in price this morning before the company’s earnings call took place. I believe this was a delayed reaction to a disappointing earnings release after market close on Friday. The stock was brought back to life after the earnings call at 11 am this morning, climbing back to $28.18 but still a net drop of approximately 6% since the previous market close. Although we are slightly below our stop loss, I don’t believe we should sell this stock. After updating the financial model for Inter Parfums I believe the market overreacted to the company’s lackluster earnings guidance which is why IPAR saw a comeback in the latter part of the day. Negative market conditions and foreign exchange headwinds (which are affecting every one) are expected to continue throughout the remainder of 2015 but I believe this news is already priced into the stock and it will not fall any further than it already has. Company CEO Jean Madar has admitted to light launch activity in 2015 and promises higher activity in 2016. In my opinion, this shows the company is in a transitioning phase. They are focusing their attention on mitigating headwinds that are out of their control, while planning new brand building investments and acquisitions for 2016. In my opinion, this company has a tough six months ahead of it but will be in a great position to grow going into 2016.  

As of Monday, August 10, 2015 after market close the stock is priced at $28.18 per share. 

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