Citi Downgrades Physicians Formula (FACE) to Hold; Loss Reduces Visibility Significantly

May 12, 2009 9:03 AM EDT

Citi downgrades Physicians Formula (Nasdaq: FACE) from Buy to Hold.

Citi analyst says, "We rate the shares of FACE Hold/Speculative Risk based primarily on our concerns about the stock's current valuation, which we believe adequately reflects the earnings growth outlook for the company over the next several years. Indeed, Physicians Formula is a tiny player in the cosmetics industry, but they have carved out a niche among deeper-pocketed competitors like PG and L'Oreal, and have grown their market shares rapidly over the last few years, primarily in bronzers and other facial cosmetics. Over the last five years, FACE grew sales and operating profits at 17% and 3% CAGR's, respectively. While we acknowledge FACE's consistent calendar of new product launches may meaningfully impact the company's sales and earnings growth going forward beyond our forecast, we believe our current earnings expectations, and thus the company's current stock price, adequately reflect realistic outcomes for each of these factors at this point...we are lowering our EPS estimates for FY09 (to -$0.08, from $0.18) and FY10 (to $0.20, from $0.28) and FY11 (to $0.27, from $0.33)."

Physicians Formula Holdings, Inc. (Holdings) is a cosmetics company, which specializes in developing and marketing products for the mass market channel. The Company's products focus on addressing skin imperfections.

To see more analyst ratings on FACE Click Here.

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