Shares of Estee Lauder Companies Inc.EL touched a 52 week high of $98.22 on Jun 19, following its announcement to invest in Deciem - a fast-growing multi-brand company. Shares eventually closed the day at $98.19.
Estee Lauder is one of the world's leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products. The company has also been making a series of investments in the makeup segment including Becca and Too Faced. Last week, with the investment announcement in Deciem, Estee Lauder expects to boost its skincare segment's appeal.
Deciem focuses mostly on millennial beauty users and diverse skin tones, and offers a broad range of products. So far, it has launched 10 brands - including The Ordinary and NIOD. The company's unique products are massively popular and sold in over 150 countries. This is likely to help Estee Lauder capitalize on this popularity and seize a bigger chunk of the global skincare market.
Estee Lauder Companies, Inc. (The) Price, Consensus and EPS Surprise
Estee Lauder's business is gaining impetus of late, driven by many brands, channels and markets that experienced strong momentum. Since the beginning of fiscal 2017, sales have been improving. The company expects sales to improve further in the fourth quarter and the trend is expected to continue in fiscal year 2018.
Further, consumers' rising demand for beauty products, particularly in the luxury arena and makeup, led to robust growth in its high-end brands and continued double-digit growth in the makeup category. After make-up category, the skincare segment is currently the company's second largest revenue contributor. Therefore, brands like Deciem might help strengthen Estee Lauder's global skincare market share with diverse range of products, popularity among the younger beauty users, and a strong presence in the digital sales channels.
Despite economic challenges and volatility slowing the pace of market growth in Hong Kong and several emerging markets, Estee Lauder is expected to remain focused on its prestige beauty industry that has been growing steadily for years. The pace of growth is likely to be faster than other sectors. In fact, it expects global prestige beauty industry to grow 4-5% during the year.
The company's stock gained 5.5% in the last one year, outperforming the Zacks categorized Cosmetics and Toiletries industry's fall of 13.8%. Notably, the industry is part of the bottom 28% of the Zacks Classified industries (191 out of the 265).
Estee Lauder currently carries a Zacks Rank #3 (Hold).
Other better-ranked stocks in the broader consumer staples sector include Ollie's Bargain Outlet Holdings, Inc. OLLI , Inter Parfums, Inc. IPAR and Tupperware Brands Corporation TUP . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Ollie's Bargain has a long-term earnings growth rate of 18.9%.
Inter Parfums and Tupperware Brands have long-term earnings growth rate of 12.3% and 12%, respectively.
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