We recently reiterated our Neutral recommendation on
Estee Lauder Companies
). The company posted third-quarter fiscal 2012 earnings of 38
cents per share, exceeding the Zacks Consensus Estimate of 33 cents
by 8.6% as well as the prior-year earnings of 35 cents by
The better-than-expected third quarter results came on the back
of strong sales in all product categories across every geographic
division. New product innovation as well as high quality and
personalized customer service also boosted profits during the
Estee Lauder has performed consistently well in developed
regions despite severe economic challenges. Moreover, the company
reported positive sales in the premium brands as consumers
preferred to spend more for high-quality products.
With new product launches and a loyal customer base, Skin care
and Fragrance continued to be the basic pillar of the company's
sales growth. The company maintained an aggressive marketing
strategy that consistently helped it to gain market share of the
The company is fast expanding into emerging markets like Brazil,
China and Israel. With the economic environment being sluggish in
the developed nations, demand has remained relatively stable for
companies that are more exposed to developing countries, especially
the fast-growing emerging markets.
However, the company's close competitor
Elizabeth Arden Inc.
) has a strong foothold in the "musician perfume" market, and many
of its brands are marketed and endorsed by popular artists. A new
generation might be more attracted by the celebrity power of
Elizabeth Arden's offerings, which may pose a risk to Estee
Lauder's market share.
The soft pace of the U.S. economic recovery leading to slow job
growth, high interest rates and still tightened credit availability
continues to hurt costumer discretionary spending, thereby
impacting the growth prospects of the company.
Based in New York, Estee Lauder is one of the world's leading
manufacturers and marketers of skin care, makeup, fragrance, and
hair care products. Currently, Estee Lauder carries a Zacks #3 Rank
(short-term Hold rating).
ESTEE LAUDER (EL): Free Stock Analysis Report
ELIZABETH ARDEN (RDEN): Free Stock Analysis
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