Valued at a market cap of $22 billion, The Estée Lauder Companies Inc. (EL) manufactures, markets, and sells skin care, makeup, fragrance, and hair care products. The New York-based company offers its products under various brands, including Estée Lauder, Clinique, Origins, M·A·C, Bobbi Brown Cosmetics, La Mer, Aveda, Jo Malone London, TOM FORD, Too Faced, Dr.Jart+, and The Ordinary brands.
This personal care company has considerably underperformed the broader market over the past 52 weeks. Shares of EL have fallen 52.7% over this time frame, while the broader S&P 500 Index ($SPX) has soared 9.2%. Moreover, on a YTD basis, the stock is down 18.3%, compared to SPX’s 3.7% loss.
Narrowing the focus, EL’s underperformance looks pronounced when compared to the Consumer Staples Select Sector SPDR Fund’s (XLP) 6.4% uptick over the past 52 weeks and 3.5% rise on a YTD basis.
On May 1, EL reported its Q3 results. The company delivered adjusted earnings of $0.65 per share and revenue of $3.6 billion, which handily surpassed Wall Street's estimates. Yet, its shares plunged 1.8% after the earnings release. Compared to the same quarter last year, its revenue declined 9.9% due to lower organic sales across all of its product categories, while its adjusted EPS fell 33%, fueled by a decline in sales and a drop in operating margin. This might have weighed on investor confidence.
For fiscal 2025, the company expects net sales and organic sales to decline by 8% to 9%, and projects adjusted EPS in the range of $1.30 to $1.55, representing a decline of 50.2% to 40.2% compared to fiscal 2024. The guidance reflects a high single-digit decline in organic net sales in the Asia/Pacific region, primarily due to persistently weak consumer sentiment in China, which might have further dampened investor confidence.
For the current fiscal year, ending in June, analysts expect EL’s EPS to decline 43.6% year over year to $1.46. The company’s earnings surprise history is promising. It exceeded the consensus estimates in each of the last four quarters.
Among the 26 analysts covering the stock, the consensus rating is a “Hold” which is based on three “Strong Buy,” one “Moderate Buy,” and 22 “Hold” ratings.
This configuration is slightly less bullish than a month ago, with four analysts suggesting a “Strong Buy” rating.
On May 2, Robert Ottenstein from Evercore Inc. (EVR) maintained a “Buy” rating on EL with a price target of $90, which indicates a 47% potential upside from the current levels.
The mean price target of $67.56 represents a 10.3% premium from EL’s current price levels, while the Street-high price target of $100 suggests an upside potential of 63.3%.
