Yahoo Finance Estee Lauder (EL) Down 10% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Estee Lauder (EL). Shares have lost about 10% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Estee Lauder due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Estee Lauder Q3 Earnings Beat Estimates, Sales Up
The Estee Lauder Companies reported third-quarter fiscal 2024 results, with the top and the bottom line increasing year over year. Quarterly net sales and earnings surpassed the Zacks Consensus Estimate. Asia travel retail experienced a return to organic sales growth, as developed and emerging markets across Asia/Pacific, Europe, the Middle East & Africa (EMEA) and Latin America further contributed to the positive performance. Considering macroeconomic challenges — including softness in overall prestige beauty in mainland China and geopolitical volatility in certain regions — management is lowering its organic net sales outlook for the fiscal 2024. The company is increasing and tightening its adjusted EPS outlook for the year.
Quarter in Detail
The company posted adjusted earnings of 97 cents per share, surpassing the Zacks Consensus Estimate of 48 cents. The bottom line increased significantly from earnings of 47 cents reported in the year-ago quarter. Adjusted EPS came in at $1.02 cents at constant currency or cc.
Net sales of $3,940 million surpassed the Zacks Consensus Estimate of $3,924.8 million. The metric increased 5% from $3,751 million reported in the year-ago quarter. Organic net sales increased 6%, mainly driven by double-digit growth in EMEA, stemming from improved sales in Asia travel retail. The increase in Asia travel retail can be attributed to higher shipments, courtesy of better retail sales trends and retailer inventory levels among other reasons. The growth in organic net sales also shows strength in developed and emerging markets across Asia/Pacific, The Americas and EMEA. The company experienced net sales growth across nearly all product categories, with skincare emerging as the standout leader.
The gross profit came in at $2,833 million, up 9% year over year. Gross margin came in at 71.9%, up from 69.1% reported in the year-ago quarter.
The operating income came in at $531 million, up 79% from $297 million reported in the year-ago period. Operating income margin expanded to 13.5% from 7.9% reported in the year-ago quarter.
Product-Based Segment Results
Skin Care’s sales were up 8% year over year to $2,060 million. Makeup revenues grew 3% year over year to $1,136 million. In the Fragrance category, revenues of $575 million were in line with the year-ago quarter’s figure. Hair Care sales totaled $143 million, down 3% year over year.
Regional Results
Sales in the Americas increased 3% year over year at $1,117 million. Revenues in the EMEA region grew 12% to $1,647 million. In the Asia-Pacific region, sales inched down 1% to $1,176 million.
Other Updates
The company exited the quarter with cash and cash equivalents of $3,701 million, long-term debt of $7,265 million and total equity of $5,744 million.
The net cash flow provided by operating activities for nine months ended Mar 31, 2024, was $1,471 million. Capital expenditures during this time amounted to $702 million. The company returned $710 million to shareholders through dividend payouts.
Fiscal 2024 Outlook
For fiscal 2024, management now projects a net sales decline of 2-3%. The company had earlier expected the metric in the range of a 1% decline and a 1% increase. Organic net sales are anticipated to decline 1-2%. Organic net sales were earlier anticipated in the range of a 1% decline and a 1% increase in the fiscal 2024.
Adjusted EPS are expected in the band of $2.14-$2.24, suggesting decline from $3.46 reported in the fiscal 2023. Adjusted EPS were earlier expected in the band of $2.08-$2.23. Adjusted EPS are projected to decline 33-36% at cc compared with a decline of 34-38% projected earlier. The company’s guidance assumes an annual effective tax rate of nearly 35%.
Q4 Guidance
For the fourth quarter of fiscal 2024, The Estee Lauder Companies anticipates reported net sales to grow 5-9% year over year. Organic net sales are likely to increase 6-10% in the quarter. Reported EPS is projected to be between 11 and 22 cents. Adjusted EPS, on a cc basis, are expected to increase more than 100% to 19-29 cents at cc.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -67.59% due to these changes.
VGM Scores
Currently, Estee Lauder has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Estee Lauder has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Estee Lauder is part of the Zacks Cosmetics industry. Over the past month, Helen of Troy (HELE), a stock from the same industry, has gained 10.4%. The company reported its results for the quarter ended February 2024 more than a month ago.
Helen of Troy reported revenues of $489.2 million in the last reported quarter, representing a year-over-year change of +1%. EPS of $2.45 for the same period compares with $2.01 a year ago.
Helen of Troy is expected to post earnings of $1.59 per share for the current quarter, representing a year-over-year change of -18%. Over the last 30 days, the Zacks Consensus Estimate has changed -6.8%.
Helen of Troy has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
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