During the spring and summer as the indexes groped for
short-term lows,Estee Lauder (
) fell 24%.
The correction proved useful. Estee Lauder shaped a
cup-with-handle base and undercut the low of the previous base.
The undercut reset the base count.
The stock cleared the 62.08 buy point on Oct. 1, but volume
was only 31% above average. A breakout should show a volume spike
of at least 40%. This tells investors that funds are behind the
Estee Lauder rose about 5% and then declined. The stock
corrected in subdued volume and is now testing its 50-day moving
If the market were to shift to a confirmed uptrend, Estee
Lauder might be in position to recross the 62.08 buy point or
bounce off the 50-day line. In both cases, strong volume is
Earnings increased 42% in fiscal Q4, ended in June, as sales
At the August earnings call, CEO Fabrizio Freda said the sales
increase "was about twice the rate of global prestige beauty,
which means we gained share and further strengthened our position
as industry leader."
In a weak economy such as the current one, the prestige beauty
category often proves resilient even as consumers tighten
spending. The prices of lipstick and other beauty products are
sufficiently modest to allow women to satisfy the urge to splurge
without spending much.
Trends also favor Estee Lauder.
Freda said China is "the fastest-growing beauty market." Estee
Lauder's sales in China jumped 28% in local currency in fiscal
The company's footprint in China grew from 38 to 58 cities on
a year-ago basis. More growth is planned.
Brazil also holds potential. Quarterly sales soared almost 50%
in local currency, Freda said.
Estee Lauder pays a dividend, but since 2002 has distributed
it once a year. The annualized yield is 1.7%.
Fiscal Q1 results will be released at 9:30 a.m. ET on Nov. 1.
The Street expects EPS to rise 8% on 2% revenue growth.
The company makes, markets and sells its beauty products in
more than 150 countries. The Americas account for about 42% of
sales; Europe, the Middle East and Africa, 37%; and Asia Pacific,