Estee Lauder's (EL) Online & Emerging Market Sales Aid Growth

The Estee Lauder Companies Inc. EL is benefiting from a strong presence in emerging markets, where demand appears to be growing. The beauty company has a strong online business, which is proving to be a major growth driver. The company continues to operate in a challenging macroeconomic environment. Yet, management is on track to operationalize the Profit Recovery Plan.

Let’s discuss this in detail.

Solid Emerging Market Presence

The Estee Lauder Companies generates significant revenues from emerging markets like Thailand, India, Russia and Brazil, which encourages it to make distributional, digital and marketing investments in these countries. As a result, the company is well insulated from macroeconomic headwinds in developed nations. Management is building out infrastructure across emerging regions that help in generating continued growth. The company is on track to expand its reach across high-growth channels while strategically expanding brands into new countries.

Online Growth

The company has been implementing new technology and digital experiences, including online booking for each store appointment, omni-channel loyalty programs and high-touch mobile services. These initiatives and the company’s digital-first mindset have been aiding the Estee Lauder Companies’ online sales. The company is expanding its omnichannel capabilities to aid flexible and convenient shopping options for consumers.

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Hurdles on the Way

The Estee Lauder Companies continues to operate in a challenging macroeconomic environment and geopolitical tensions across certain parts of the world. The Estee Lauder Companies is bearing the brunt of weakness in the Asia travel retail and a slower-than-anticipated recovery in prestige beauty across mainland China. In the Asia-Pacific region, organic net sales fell 7%, thanks to continued challenges in Mainland China. Also, EL’s solid international presence keeps it exposed to unfavorable currency fluctuations.

For the fiscal 2024, management projects net sales and organic net sales in the range of a 1% decline and a 1% increase. Adjusted earnings per share are expected in the band of $2.08-$2.23, suggesting a decline from $3.46 reported in the fiscal 2023.

Profit Recovery Plan

The Zacks Rank #3 (Hold) company is on track to operationalize the Profit Recovery Plan for fiscal 2025 and 2026 (announced in Nov 2023), which is likely to offer respite. Management recently announced the expansion of the plan to include the restructuring program. The expanded plan is focused on rebuilding stronger and more sustainable profitability alongside supporting sales growth.

Through the plan, the company is increasing speed and agility. The program aims to better the gross margin and reduce cost base and overhead expenses while increasing investments in consumer-facing activities. In this regard, management seeks to provide faster products and innovations to consumers supported by strategic brand-building and go-to-market advancement. Digitalization efforts remain at the core of the company.

The stock has moved up 10.8% in the past three months compared with the industry’s 14.6% growth.

Solid Staple Bets

Post Holdings POST, which operates as a consumer packaged goods holding company, sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 52.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Post Holdings’ current financial-year sales and earnings suggests growth of 15.2% and 3.4%, respectively, from the year-ago reported numbers.

Vital Farms Inc. VITL offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter average earnings surprise of 145%.

The Zacks Consensus Estimate for Vital Farms’ current financial-year sales indicates growth of 29% from the year-ago reported actuals.

Utz Brands Inc. UTZ manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ’s has a trailing four-quarter earnings surprise of 2.6%, on average.

The Zacks Consensus Estimate for Utz Brands’ current financial-year sales and earnings suggests growth of 0.9% and 19.3%, respectively, from the year-ago reported numbers.

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The Estee Lauder Companies Inc. (EL) : 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.

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