Will Estee Lauder Inc. (EL) Surprise this Earnings Season? - Analyst Blog

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Estee Lauder Inc. ( EL ) is set to report fourth-quarter and full-year fiscal 2014 results on Aug 15. Last quarter, the company posted a negative surprise of 2%. Let's see how things are shaping up for this announcement.

Factors to Consider This Quarter

Estee Lauder has been posting better-than-expected results for several quarters backed by organic sales growth, product innovation and cost savings measures.


Management expects the momentum to continue even in the fourth quarter and raised its fiscal 2014 earnings per share outlook during the third-quarter earnings conference call. Estee Lauder expects earnings within $2.86 to $2.90 up from prior expectations $2.80 to $2.87.

However, travel retail, which accounts for a significant portion of Estee Lauder's revenues, suffered a setback during the quarter. These factors may hamper top-line growth in the fourth quarter, thus putting earnings under pressure, in our view.

Moreover, macroeconomic issues like the ongoing slowdown in the Chinese economy and the unfavorable currency translation in emerging markets may affect the company's international sales.

Earnings Whispers?

Our proven model does not conclusively show that Estee Lauder is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimate. However, that is not the case here due to the following factors:

Zacks ESP: ESP for Estee Lauder is 0.00%.

Zacks Rank: Estee Lauder has a Zacks Rank #3 (Hold) which when combined with a 0.00% 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 revision momentum.

Other Stocks to Consider

Other stocks in the consumer staples sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Pinnacle Foods Inc ( PF ), with an Earnings ESP of +3.03% and a Zacks Rank #2 (Buy). 

Supervalu Inc ( SVU ), with an Earnings ESP of +9.09% and a Zacks Rank #3. 

Inventure Foods Inc ( SNAK ), with an Earnings ESP of +5.56% and a Zacks Rank #3


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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 , Earnings , Stocks

Referenced Stocks: SVU , EL , SNAK , PF

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