The Estée Lauder Companies Inc. (EL), headquartered in New York, manufactures, markets, and sells skin care, makeup, fragrance, and hair care products. Valued at $33.48 billion by market cap, the company's products are sold through department stores, mass retailers, company-owned retail stores, hair salons, and travel-related establishments.
Shares of this global leader in prestige beauty have underperformed the broader market considerably over the past year. EL has declined 45.3% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 17%. In 2024 alone, EL stock is down 36.2%, while the SPX is up 9.9% on a YTD basis.
Narrowing the focus, EL’s underperformance is also apparent compared to the S&P 500 Cons Staples Sector SPDR (XLP). The exchange-traded fund has gained about 4.2% over the past year. The ETF’s 8.9% returns on a YTD basis outshine the stock’s double-digit losses over the same time frame.
On Jun. 28, EL shares closed down more than 4% on negative carryover from a fall in L’Oreal SA after it expected slower growth for the overall beauty market this year, given the weakness in Chinese sales.
On May 1, EL shares closed down more than 13% after the company reported its Q3 results. It cut the guidance on its full-year sales and now expects a decline of 2% to 3%. Previously, the company expected its full-year sales to be between -1% to +1%. Its revenue was $3.94 billion, beating analyst estimates of $3.91 billion. Its adjusted EPS of $0.97 exceeded analyst estimates of $0.50. The company’s gross margin of 71.9% compares to the 69.1% in the year-ago quarter, and free cash flow stood at $359 million, down 67.7% year over year. Additionally, its organic revenue was up 5.9% year over year.
For Q4, its adjusted EPS is expected to be $0.24 at the midpoint, well below analyst estimates of $0.75. Moreover, its full-year adjusted EPS is expected to be $2.19 at the midpoint, below analyst estimates of $2.25.
For the current fiscal year, which ended in June, analysts expect EL’s EPS to decline 36.1% to $2.21 on a diluted basis. The company’s earnings surprise history is impressive. It beat the consensus estimate in each of the last four quarters.
Among the 26 analysts covering EL stock, the consensus rating is a “Moderate Buy.” That’s based on eight “Strong Buy” ratings, one “Moderate Buy,” and 17 “Holds.”
This configuration is slightly less bullish than three months ago, with nine suggesting a “Strong Buy.”
Recently, Evercore ISI analyst Robert Ottenstein maintained a “Buy” rating on EL stock, with a price target of $180, implying a potential upside of 92.8% from current levels.
The mean price target of $132.71 represents a 42.1% premium to EL’s current price levels. The Street-high price target of $191 suggests an ambitious upside potential of 104.6%.
On the date of publication, Neha Panjwani 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.
