Estée Lauder Shares Decline Amidst Broader Market Gains
Valued at a market cap of $22 billion, The Estée Lauder Companies Inc. (EL) manufactures, markets, and sells skin care, makeup, fragrance, and hair care products. The New York-based company features an array of well-known brands including Estée Lauder, Clinique, Origins, M·A·C, Bobbi Brown Cosmetics, La Mer, Aveda, Jo Malone London, TOM FORD, Too Faced, Dr.Jart+, and The Ordinary.
Recent Performance Analysis
Over the past 52 weeks, the company has significantly underperformed compared to the broader market. EL shares have dropped 52.7%, while the S&P 500 Index ($SPX) has increased by 9.2%. Year-to-date, EL is down 18.3%, contrasting with the SPX’s 3.7% loss. This decline becomes even clearer when compared to the Consumer Staples Select Sector SPDR Fund’s (XLP), which has shown a 6.4% gain over the same timeframe and a 3.5% increase year-to-date.
Quarterly Earnings Update
On May 1, EL reported its Q3 results, with adjusted earnings of $0.65 per share and revenue reaching $3.6 billion, both exceeding Wall Street estimates. However, shares fell by 1.8% post-earnings release. Year-over-year, revenue declined by 9.9%, largely attributed to weaker organic sales across all product categories. Moreover, adjusted EPS fell 33%, influenced by reduced sales and a decrease in operating margins, potentially impacting investor sentiment.
Fiscal Projections
For fiscal 2025, the company anticipates a decline in net sales and organic sales by 8% to 9%. Adjusted EPS is projected to fall between $1.30 to $1.55, marking a decline of 50.2% to 40.2% compared to fiscal 2024. The guidance also anticipates a high single-digit decline in organic net sales in the Asia/Pacific region, primarily due to persistently low consumer sentiment in China.
This fiscal year, which ends in June, analysts predict an EPS decline of 43.6% year-over-year to $1.46. Notably, EL has a strong earnings surprise history, having exceeded consensus estimates in the last four quarters.
Analyst Consensus Overview
Among the 26 analysts covering the stock, the consensus rating is a “Hold.” This rating comes from three “Strong Buy,” one “Moderate Buy,” and 22 “Hold” recommendations. This represents a slight drop in bullish sentiment from the previous month, during which four analysts had suggested a “Strong Buy.”
Price Targets
On May 2, Robert Ottenstein from Evercore Inc. (EVR) maintained a “Buy” rating on EL, with a price target of $90, suggesting a potential upside of 47% from current levels. The mean price target stands at $67.56, representing a 10.3% premium from EL’s current price, while the highest target of $100 indicates a possible 63.3% upside.
On the date of publication, Neharika Jain did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
