Estée Lauder Faces Headwinds Amid Market Challenges
The Estée Lauder Companies Inc. (EL), headquartered in New York, is known for its wide range of beauty products, including skincare, makeup, fragrance, and hair care items. The company’s market capitalization stands at $22.9 billion, with its products sold through various channels, such as department stores, mass retailers, and its own outlets.
Stark Drop in Stock Performance
Over the last year, shares of Estée Lauder have sharply lagged behind the overall market. EL has dropped 49.4%, while the S&P 500 Index ($SPX) has increased by nearly 30.4%. In 2024, the situation worsened, with EL stock down 56.4%, contrasting with the SPX, which is up 23.1% year-to-date.
Diminished Standing Against Consumer Staples
Compared to the Consumer Staples Select Sector SPDR Fund (XLP), Estée Lauder’s situation appears even more concerning. The ETF has recorded a 13.5% gain over the past year and an 11% return year-to-date, highlighting EL’s ongoing struggle with losses.
Market Reactions Amid Political Uncertainty
On November 6, Estée Lauder shares fell over 3% despite a rally in the broader market. This decline came after challenges in China and worries about a potential U.S.-China trade war, particularly in light of former President Trump’s victory and his comments on tariffs. Such political climate raises concerns for multinational companies like Estée Lauder.
Analysts Predict Further Challenges Ahead
For the fiscal year ending in June 2025, analysts forecast a significant decline of 38.6% in EL’s earnings per share (EPS), estimating it at $1.59 on a diluted basis. Despite this gloomy outlook, the company has a solid history of exceeding earnings expectations, having beat consensus estimates in the previous four quarters.
Shift in Analyst Ratings
Among 26 analysts covering EL stock, the consensus rating has shifted to “Hold,” down from “Moderate Buy” just a month ago. This rating is based on four “Strong Buy” ratings, one “Moderate Buy,” and 23 “Hold” ratings, reflecting a less optimistic viewpoint than before.
Price Target Adjustments
On November 4, analyst Anna Glaessgen from B. Riley Financial, Inc. (RILY) lowered the price target for Estée Lauder to $70 from $95 while keeping a “Neutral” rating. This downgrade reflects worries about market deceleration and uncertainties regarding market share stabilization. The analyst believes the stock will likely remain flat for the time being.
The average price target among analysts is $81.64, indicating a potential upside of 28.1% from the current price. Conversely, the highest price target of $117 suggests a more ambitious upside potential of 83.5%.
On the date of publication, Kritika Sarmah did not hold any positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. For more details, please view the Barchart Disclosure Policy here.
The views expressed in this article are those of the author and do not necessarily reflect those of Nasdaq, Inc.
