We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The Estee Lauder Companies (EL) Dips More Than 35%: Here's Why
Read MoreHide Full Article
The Estee Lauder Companies Inc. (EL - Free Report) is bearing the brunt of continued inflationary pressures. The leading skincare, makeup, fragrance and hair care product provider is battling unfavorable currency headwinds.
The company is grappling with challenges in its Asia travel retail business, which continued in the fourth quarter of fiscal 2023. Margins also remained soft in the quarter. Moreover, management offered a dull view for first-quarter fiscal 2024.
Shares of the Zacks Rank #5 (Strong Sell) stock have slumped 35.8% year-to-date compared with the industry’s 23.1% decline. The stock has underperformed the Zacks Consumer Staples’s decline of 4.1% during this time.
Let’s delve deeper.
Margin Pressure Continues
In fourth-quarter fiscal 2023, The Estee Lauder Companies’ adjusted gross profit came in at $2,467 million, down 3% year over year. The gross margin contracted to 67.8% from 71% reported in the year-ago quarter. The downside was caused by the under-absorption of overhead in its plants stemming from the pull-down of production during the year. The company’s operating income fell 66% to $71 million while its operating margin contracted 380 basis points (bps) to 2%. Operating expenses, as a percentage of sales, increased 70 bps, thanks to increased advertising and promotional activities.
Image Source: Zacks Investment Research
Unfavorable Currency Movements Hurt
Owing to The Estee Lauder Companies’ solid international presence, it remains exposed to unfavorable currency fluctuations. Any adverse currency fluctuation will likely weigh on the company’s operating performance. For fiscal 2024, management projects an unfavorable currency impact of 1% on net sales. Currency headwinds will likely affect net earnings per share (EPS) by nearly 11 cents in fiscal 2024.
Dull Outlook a Concern
In its last earnings call, management highlighted that it remains cautious about economic hurdles in China, volatile inflation levels, foreign currency fluctuations and concerns surrounding recession (in several global markets). For the first quarter of fiscal 2024, Estee Lauder anticipates reported and organic net sales to decline 12-10% year over year. The bottom line is envisioned in the band of a loss of 31 cents per share and a loss of 21 cents in the fiscal first quarter. On a cc basis, the bottom line is likely to range between a loss of 29 cents and a loss of 19 cents per share.
Wrapping Up
The Estee Lauder Companies has a strong e-commerce business, which is expected to be a significant growth engine in the upcoming years. Management is expanding its omnichannel capabilities to aid flexible and convenient shopping options for consumers. The company has a strong presence in emerging markets, which insulates it from the macroeconomic headwinds in the matured markets.
That being said, whether these upsides can help The Estee Lauder Companies stay afloat amid hurdles is yet to be seen.
Some Solid Staple Bets
Inter Parfums (IPAR - Free Report) , which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently sports a Zacks Rank #1 (Strong Buy). IPAR has an expected EPS growth rate of 15% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 19.7% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.9% on average.
Helen of Troy (HELE - Free Report) , a provider of several consumer products, currently has a Zacks Rank #2 (Buy). HELE’s expected EPS growth rate for three to five years is 8%.
The Zacks Consensus Estimate for Helen of Troy’s current fiscal-year sales suggests a decline of 2.9% from the year-ago reported numbers. HELE has a trailing four-quarter earnings surprise of 8.1%, on average.
The J. M. Smucker Company (SJM - Free Report) , which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 14% on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year earnings suggests growth of 6.8% from the year-ago reported figure.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
The Estee Lauder Companies (EL) Dips More Than 35%: Here's Why
The Estee Lauder Companies Inc. (EL - Free Report) is bearing the brunt of continued inflationary pressures. The leading skincare, makeup, fragrance and hair care product provider is battling unfavorable currency headwinds.
The company is grappling with challenges in its Asia travel retail business, which continued in the fourth quarter of fiscal 2023. Margins also remained soft in the quarter. Moreover, management offered a dull view for first-quarter fiscal 2024.
Shares of the Zacks Rank #5 (Strong Sell) stock have slumped 35.8% year-to-date compared with the industry’s 23.1% decline. The stock has underperformed the Zacks Consumer Staples’s decline of 4.1% during this time.
Let’s delve deeper.
Margin Pressure Continues
In fourth-quarter fiscal 2023, The Estee Lauder Companies’ adjusted gross profit came in at $2,467 million, down 3% year over year. The gross margin contracted to 67.8% from 71% reported in the year-ago quarter. The downside was caused by the under-absorption of overhead in its plants stemming from the pull-down of production during the year. The company’s operating income fell 66% to $71 million while its operating margin contracted 380 basis points (bps) to 2%. Operating expenses, as a percentage of sales, increased 70 bps, thanks to increased advertising and promotional activities.
Image Source: Zacks Investment Research
Unfavorable Currency Movements Hurt
Owing to The Estee Lauder Companies’ solid international presence, it remains exposed to unfavorable currency fluctuations. Any adverse currency fluctuation will likely weigh on the company’s operating performance. For fiscal 2024, management projects an unfavorable currency impact of 1% on net sales. Currency headwinds will likely affect net earnings per share (EPS) by nearly 11 cents in fiscal 2024.
Dull Outlook a Concern
In its last earnings call, management highlighted that it remains cautious about economic hurdles in China, volatile inflation levels, foreign currency fluctuations and concerns surrounding recession (in several global markets). For the first quarter of fiscal 2024, Estee Lauder anticipates reported and organic net sales to decline 12-10% year over year. The bottom line is envisioned in the band of a loss of 31 cents per share and a loss of 21 cents in the fiscal first quarter. On a cc basis, the bottom line is likely to range between a loss of 29 cents and a loss of 19 cents per share.
Wrapping Up
The Estee Lauder Companies has a strong e-commerce business, which is expected to be a significant growth engine in the upcoming years. Management is expanding its omnichannel capabilities to aid flexible and convenient shopping options for consumers. The company has a strong presence in emerging markets, which insulates it from the macroeconomic headwinds in the matured markets.
That being said, whether these upsides can help The Estee Lauder Companies stay afloat amid hurdles is yet to be seen.
Some Solid Staple Bets
Inter Parfums (IPAR - Free Report) , which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently sports a Zacks Rank #1 (Strong Buy). IPAR has an expected EPS growth rate of 15% for three to five years. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 19.7% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.9% on average.
Helen of Troy (HELE - Free Report) , a provider of several consumer products, currently has a Zacks Rank #2 (Buy). HELE’s expected EPS growth rate for three to five years is 8%.
The Zacks Consensus Estimate for Helen of Troy’s current fiscal-year sales suggests a decline of 2.9% from the year-ago reported numbers. HELE has a trailing four-quarter earnings surprise of 8.1%, on average.
The J. M. Smucker Company (SJM - Free Report) , which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 14% on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year earnings suggests growth of 6.8% from the year-ago reported figure.