Revlon (NYSE:REV) is scheduled to release results tomorrow. The troubled cosmetics company hopes to report rosy results, but let's take a look at what investors can expect.

What analysts say:

  • Buy, sell, or waffle? Three analysts follow Revlon. Two have a hold rating, and one serves up a sell recommendation. One brokerage has recently dropped its rating to a hold, from buy.
  • Revenue. Analysts are forecasting $325.1 million in revenue, just a 1.5% increase from the prior year.
  • Earnings. This section should actually be called "losses." On average, the forecast calls for a $0.07-per-share drop. But at least that's better than the $0.21 Revlon lost a year ago.

What management says:
Management would like investors to focus on adjusted EBITDA, rather than the bottom line (and who can blame them?). The company has focused on cost-cutting measures, and to get the top line moving, it's trying to strengthen its Revlon and Almay brands and has discontinued its Vital Radiance line. Marketing and research-and-development efforts have been focal points, with new products being launched.

What management does:
So far, the efforts have generated few tangible benefits. First-quarter sales rose only 0.6% when currency effects are taken out. Its cosmetics lost market share, with the Revlon brand losing 140 basis points and Almay virtually unchanged. Sales for the company's Beauty Tools products, although still commanding more than one-quarter of the entire market share, also fell from the prior year.

Adjusted EBITDA more than doubled, to $32.3 million, almost all as a result of cost-cutting efforts. Including restructuring costs, the company still lost $0.07 per share in the quarter. Although that's less than the $0.15 it lost the year before, it's small consolation to investors. Fools should also note the steadily declining gross margin, which was attributable to lower volume and to selling lower-margin products.

12/05

3/06

6/06

9/06

12/06

3/07

Gross Margin

61.9%

62.3%

61.1%

60.5%

60.8%

60.3%

Operating Margin

5.4%

4.6%

2.2%

3.9%

2.2%

3.4%

Net Margin

(6.3%)

(7%)

(10.8%)

(13.1%)

(18.9%)

(17.1%)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Cost-cutting is improving results, but it's also hiding weak sales and market share. There are a host of competitors that fight for shelf space in the same stores, including Maybelline, a division of L'Oreal (OTC BB: LRLCY.PK), and consumer giant Procter & Gamble (NYSE:PG), proud owner of the Cover Girl and Max Factor brands. It's hard to keep hide the flaws when you've got competition that tough.

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Fool contributor Larry Rothman is happy to receive feedback, and he promises to read it when he's not being wrestled by his three children. He doesn't have any positions in the companies mentioned. The Fool has a disclosure policy.