On Mar 22, 2013, we maintained our Neutral recommendation on
Estee Lauder Companies Inc.
) following the appraisal of its second quarter 2013 results.
Why the Reiteration?
Estee Lauder reported second quarter 2013 earnings on Feb 5, 2013
with adjusted earnings of $1.16 increasing 14.9% from the
prior-year quarter earnings and also beating the Zacks Consensus
Estimate by 14.8%, on the back of strong business in the U.S. and
We are encouraged by the company's strong brand portfolio and
growing prestige beauty segment. Moreover, the company is fast
spreading into developing nations of Latin America and Asia,
where its flagship brand MAC is gaining massive popularity. The
company is putting a lot of emphasis on travel retail and boosts
sales through aggressive promotions and store openings.
The High-Touch customer service (customer service with
extensive personal contact) of Estee Lauder is also helping it to
attract new customers and maintain loyalty of existing ones.
Moreover, the company has been growing faster than the industry
in the past years and aims to grow at least 1% faster than the
global beauty product industry moving into 2014.
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Although the company is on track to achieve its cost reduction
goal, and increasing its operational efficiency and focusing on
high-margin products, the absence of strategic acquisitions and
slow recovery of economic conditions concern us.
Other Stocks to Consider
Estee Lauder carries a Zacks Rank #2 (Buy). Other stocks in the
Cosmetics segment like
Avon Products Inc.
Inter Perfums Inc.
), both carrying a Zacks Rank #1 (Strong Buy) and
International Flavors and Fragrances Inc.
), carrying a Zacks Rank #2 (Buy), are also worth