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Estee Lauder's Q3 Earnings & Revenues Beat; Ups FY View - Analyst Blog

Estee Lauder Companies Inc.EL posted solid third-quarter fiscal 2015 results, wherein both earnings as well as revenues surpassed the respective Zacks Consensus Estimate.

Earnings of 72 cents per share increased 12% from the prior-year figure of 64 cents backed by strong top-line growth. Earnings exceeded the company's guided range of 45 to 50 cents per share and surpassed the Zacks Consensus Estimate of 51 cents by 41.2%. Excluding currency, earnings increased 49%.

The Estee Lauder Companies Inc. - Earnings Surprise | FindTheCompany

Revenues and Margin

Net sales grew 1% to $2.58 billion on the back of strong sales in United Kingdom and emerging markets. Major product categories, like luxury and makeup brands, also contributed to the sales growth. Excluding currency, net sales increased 8% year over year, exceeding the company's guided range of 6-7%. Quarterly net sales beat the Zacks Consensus Estimate of $2.55 billion by 1.2%.

Gross profit increased 1% year over year to $2.07 billion from the prior-year level. Gross margin expanded 10 basis points (bps) to 80.5% due to higher sales. Operating income increased 6% to $397.2 million. Operating margin inflated 70 bps to 15.6% due to lower operating expenses.

Segment Results

By Geography

Americas: Sales in Americas rose 8% year over year on a constant currency basis to $1.11 billion. Sales increased on the back of growth in the company's makeup and luxury brands and product launch. Operating income in the region declined due to negative impact of foreign currency translation, higher general and administrative costs, acquisition-related fees and lower sales in heritage brands.

Europe, the Middle East & Africa: Sales increased 10% year over year on a constant currency basis to $950.3 million driven by strong sales in all the regions. Operating income increased led primarily by the Middle East, France, Spain, Germany and the United Kingdom, as well as travel retail.

Asia/Pacific: Sales in the region improved 5% year over year on a local currency basis to $520.3 million, backed by double-digit growth in China, Australia, Taiwan, Thailand and the Philippines. Operating income increased in the region led by higher results in China, Taiwan and Korea.

Guidance

Fiscal 2015 Guidance

Management expects business momentum to continue in the upcoming year. The company raised its fiscal 2015 earnings guidance. Earnings per share, excluding the effect of the accelerated retailer orders, are now expected within the $2.92 to $2.97 range instead of $2.93 to $3.01. Net sales, excluding the effect of the accelerated retailer orders, are projected to grow between 3% and 4% in local currency. The company expects 5% negative currency on the sales growth.

Estee Lauder has a Zacks Rank #3 (Hold).

Stocks to Consider

A couple of better-ranked stocks in the cosmetics sector are Helen of Troy HELE and Inter Parfums Inc. IPAR . While Helen of Troy sports a Zacks Rank #1 (Strong Buy), Inter Parfums carries a Zacks Rank #2 (Buy). Another stock in the broader consumer staples sector is SUPERVALU Inc. SVU sporting a Zacks Rank #1.

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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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