Citi Maintains Hold Rating on Alberto-Culver(ACV): No Big Surprises

Citi is maintaining its Hold rating for Alberto-Culver Co. ACV after ACV reported pro forma EPS of $0.52, ahead of Citi's estimates but below consensus. In the report, Citi notes that GAAP EPS was $0.47, with transaction costs associated with ACV's acquisition by Unilever causing the $0.05 difference between GAAP and pro forma EPS. Sales grew 11.7%, ahead of Citi's forecast of 8.7%, but organic growth slowed to 4.4% from 4.9% of the previous quarter. However, higher input costs put a strain on gross margins, resulting in a decrease by 20 bps to 53.2%. Citi currently has a price target of $37.50, representing in only a 1.8% upside from the current stock price of $37.16. This valuation is based on the pending acquisition by Unilver, in which ACV was offered $37.50 per share. The acquisition was announced in September 2010, and is expected to close in 2011.