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Can Estee Lauder (EL) Keep the Earnings Steak Alive in Q1?

The Estee Lauder Companies Inc.EL is set to report first-quarter fiscal 2016 results on Nov 2, before the market opens. Last quarter, the company posted a positive earnings surprise of 17.65%. In fact, Estee Lauder has delivered positive earnings surprises in all the last four quarters with an average beat of 27.98%.

Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Estee Lauder is likely to beat earnings because it has the right combination of two key ingredients:

Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.45%. This is meaningful and a leading indicator of a likely positive earnings surprise.

Zacks Rank: Estee Lauder carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Estee Lauder's Zacks Rank #3 and +1.45% ESP makes us confident about an earnings beat.

What's Driving the Better-than-Expected Earnings?

Estee Lauder has been posting better-than-expected results over the past several quarters backed by organic sales growth, product innovation and cost savings measures. The company's best-in-class collection of brands is expected to boost the top line in the to-be-reported quarter.

Successful array of product launches under Smashbox, Jo Malone and Tom Ford brands are expected to aid first-quarter results. Further, the company expanded a number of brands at its online store on Tmall, such as the Origins and La Mer brands. The company also added Bobbi Brown to its Tmall store in Sep 2015. These initiatives are expected to boost top lines in the upcoming first quarter.

Other Stocks to Consider

Here are some consumer discretionary stocks that you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Inter Parfums Inc. IPAR , with an Earnings ESP of +15.00% and a Zacks Rank #2 (Buy).

Michael Kors Holdings Ltd. KORS , with an Earnings ESP of +3.37% and a Zacks Rank #3.

Ralph Lauren Corp. RL , with an Earnings ESP of +0.58% and a Zacks Rank #3.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ESTEE LAUDER (EL): Free Stock Analysis Report

RALPH LAUREN CP (RL): Free Stock Analysis Report

MICHAEL KORS (KORS): Free Stock Analysis Report

INTER PARFUMS (IPAR): Free Stock Analysis Report

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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 Nasdaq, Inc.


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

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