Estee Lauder Companies Inc.
) is set to report fourth-quarter and full year fiscal 2013
results on Aug 15, 2013, before the opening bell. Last quarter,
it posted a 36.4% positive surprise. Let's see how things are
shaping up for this announcement.
Factors to Consider This Quarter
We are primarily concerned about the foreign exchange
volatility going on around the globe. The rising dollar against
other currencies like rupee, yen and euro has resulted in
declining export volume for Estee Lauder for the past few
quarters as international business contributes more than 80% to
Moreover, the macroeconomic pressures and weak consumer
spending environment in Europe has been hurting sales of EL's
prestige beauty brands. This can affect Estee Lauder's volume and
sales in the coming quarter.
Estee Lauder has undertaken Strategic Modernization Initiative
in order to increase its operational efficiency. The rollout of
the plan posed some operational difficulties like delay in orders
and some products being out of stock during the third quarter of
fiscal 2013. The problems are expected to continue in the fourth
quarter as well unless management fixes the problem fully which
is expected to stretch till the end of calendar 2013.
Meanwhile, we are encouraged by Estee Lauder's booming travel
retail business. The rising air traffic is expected to boost
sales in the Travel Retail segment in the quarter. Moreover, the
company's continuous product innovation helps to maintain its
market share amid difficult conditions.
Our proven model does not conclusively show that Estee Lauder
is likely to beat earnings this quarter.
Negative Zacks ESP:
Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
) of Estee Lauder is -4.55% which represents the difference
between the Most Accurate estimate (21 cents) and the Zacks
Consensus Estimate (22 cents).
Zacks Rank #3 (Hold):
Estee Lauder's Zacks Rank #3 (Hold) lowers the predictive power
of ESP because the Zacks Rank #3 (Hold) when combined with a
negative ESP makes surprise prediction difficult. We caution
against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks)
going into the earnings announcement, especially when the company
is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies worth considering as our model
shows that they have the right combination of elements to post an
earnings beat this quarter:
Pilgrims Pride Corporation
), Earnings ESP of +5.26% and a Zacks Rank #2 (Buy)
Sanderson Farms Inc.
), Earnings ESP of +5.66% and a Zacks Rank #3 (Hold)
New York & Company Inc.
), Earnings ESP of +33.33% and a Zacks Rank #3 (Hold)
ESTEE LAUDER (EL): Free Stock Analysis Report
NEW YORK & CO (NWY): Free Stock Analysis
PILGRIMS PRIDE (PPC): Free Stock Analysis
SANDERSON FARMS (SAFM): Free Stock Analysis
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