Estee Lauder Remains Neutral - Analyst Blog


On Jan 13, we reiterated our Neutral recommendation on cosmetics retailer Estee Lauder Inc. ( EL ). While the company has been delivering solid results, the continued slowdown in the European economy remains a concern.

Why Maintained at Neutral?

Estee Lauder posted better-than-expected results in all the last four quarters. Organic sales growth, product innovation and cost savings measures have remained company's strong points. However, increased input costs and macro-economic headwinds have remained the headwinds.

Moreover on Oct 31, 2013, Estee Lauder raised the lower end of its earnings guidance for fiscal 2014 to a range of $2.80-$2.87, compared to the range of $2.74-$2.87. The company, however, maintained its sales growth guidance of 6%-8% increase in constant currency.

Overall, we are encouraged by Estee Lauder's booming travel retail business. Rising air traffic is expected to boost sales in the Travel Retail segment in the upcoming quarters. The company has also witnessed a rise in online sales, which is impressive. Moreover, the company's continuous product innovation helps it to maintain market share amid difficult conditions.

Innovation remains an integral part of the company and helps it to drive profitable growth. In Sep 2013, Estee Lauder rolled out the Modern Muse fragrance brand in selected countries, which became a bestseller at Harrods in the U.K. and was among the top 10 women prestige fragrances in the U.S. Other successful fragrances launched during the quarter include the Michael Kors Collection, Tory Burch and Zegna Uomo, all of which were well received.

However, the difficult consumer spending environment remains a concern. Slow job growth, high interest rates and tightened credit availability continue to hurt costumer discretionary spending. The persistently sluggish European economic conditions also create an overhang.

Moreover, Estee Lauder's close peers like Elizabeth Arden Inc. ( RDEN ) and Avon Products Inc. ( AVP ) make frequent strategic acquisitions and alliances to expand their market. However, we see no such strategic alliances for Estee Lauder.

Estee Lauder holds a Zacks Rank #3 (Hold)

Other Stocks to Consider

A better-ranked stock in the same industry that looks attractive at the current levels is Nu Skin Enterprises Inc. ( NUS ) sporting a Zacks Rank #1 (Strong Buy).

AVON PRODS INC (AVP): Free Stock Analysis Report

ESTEE LAUDER (EL): Free Stock Analysis Report

NU SKIN ENTERP (NUS): Free Stock Analysis Report

ELIZABETH ARDEN (RDEN): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AVP , EL , NUS , RDEN

More from

Related Videos




Most Active by Volume

  • $15.85 ▲ 2.06%
  • $112.34 ▲ 4.29%
  • $57.29 ▲ 0.28%
  • $24.57 ▲ 2.89%
  • $9.32 ▲ 1.08%
  • $103.90 ▲ 2.82%
  • $105.44 ▼ 0.33%
  • $43.36 ▲ 3.68%
As of 9/2/2015, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by