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EL Stock Down More Than 25% in Three Months: Should You Buy or Sell?
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The Estee Lauder Companies Inc. (EL - Free Report) is facing significant challenges due to a volatile macroeconomic environment. Key issues include market instability in mainland China and Asia travel retail, weak consumer sentiment and reduced conversion rates. As a leading provider of skincare, makeup, fragrance and hair care products, EL’s extensive international presence exposes it to risks associated with unfavorable currency fluctuations.
Management is cautious about the potential external headwinds impacting fiscal 2025 results. The Zacks Consensus Estimate for fiscal 2025 earnings per share (EPS) has moved down 22.3% to $3.06 in the past 30 days. This downward adjustment reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.
EL’s stock has declined by 26.2% in the past three months against the industry’s 9.7% growth and the Zacks Consumer Staples sector's 5.7% increase during the same period.
Let’s delve deeper.
Image Source: Zacks Investment Research
Weakness in the Asia-Pacific Region Concerns EL
In fiscal 2024, the Asia-Pacific region, especially mainland China, encountered significant challenges, reflecting broader weakness in the prestige beauty sector. The Estee Lauder Companies’ sales in the Asia-Pacific region dropped 7% to $1.205 billion in the fourth quarter of fiscal 2024, primarily due to declining performance in mainland China. The retail sales trend worsened, falling from mid-single digits in the fiscal third quarter to low-double digits. The downside was caused by low consumer confidence and cautious spending. The Asia travel retail market also struggled, with Hainan registering a 40% sales drop. Weaker consumer sentiment, reduced basket sizes and a shift toward experiential spending contributed to these declines. For the fiscal 2025, the outlook remains tough, with a slow recovery in China and Asia travel retail that is expected to dent sales growth and profitability.
EL Vulnerable to Currency Rate Fluctuations
Thanks to The Estee Lauder Companies’ solid international presence, it remains exposed to unfavorable currency fluctuations. Any adverse currency fluctuation will likely dent the company’s operating performance. Currency headwinds are likely to affect EPS by nearly 3 cents in the fiscal 2025.
Challenging Road Ahead for The Estee Lauder Companies
EL projects a more restrained performance compared with the industry average during the fiscal 2025, largely due to its substantial business presence in mainland China and Asia travel retail.
Management is closely watching risks related to retailer destocking and weak consumer sentiment, which are impacting the prestige beauty market. Changing traveler behaviors and increased competition, particularly in North America, add to challenges. The company anticipates a challenging first-quarter fiscal 2025, with expected year-over-year declines in reported and organic net sales of 5-3%. Adjusted EPS are projected to drop 89-17% to 1-9 cents due to ongoing difficulties in key markets and shifts in consumer spending.
Investors’ Guide for EL Stock
The Estee Lauder Companies is navigating a precarious path troubled by significant macroeconomic challenges, particularly in its critical Asia-Pacific markets. Persistent weakness in mainland China and the Asia travel retail sector, compounded by unfavorable currency fluctuations, paints a bleak picture of the company's near-term performance. The sharp downward revision in fiscal 2025 earnings estimates, coupled with the substantial stock underperformance, underscores the growing investor pessimism surrounding EL's ability to weather these headwinds. Given these factors, the outlook for The Estee Lauder Companies remains highly uncertain. Investors should approach the Zacks Rank #5 (Strong Sell) stock with caution.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) is keen on providing high-quality baked items, developing strong brands, making innovations to improve capabilities and undertaking prudent acquisitions. It currently carries a Zacks Rank #2 (Buy).
The consensus estimate for Flowers Foods’ current financial-year sales and EPS implies growth of 1.1% and 4.2%, respectively, from the year-ago reported numbers. FLO has a trailing four-quarter average earnings surprise of 1.9%.
Nomad Foods (NOMD - Free Report) , carrying a Zacks Rank #2, manufactures and distributes frozen foods. NOMD has a trailing four-quarter earnings surprise of 3.1%, on average.
The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales and earnings indicates growth of 4.3% and 11.5%, respectively, from the prior-year reported level.
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EL Stock Down More Than 25% in Three Months: Should You Buy or Sell?
The Estee Lauder Companies Inc. (EL - Free Report) is facing significant challenges due to a volatile macroeconomic environment. Key issues include market instability in mainland China and Asia travel retail, weak consumer sentiment and reduced conversion rates. As a leading provider of skincare, makeup, fragrance and hair care products, EL’s extensive international presence exposes it to risks associated with unfavorable currency fluctuations.
Management is cautious about the potential external headwinds impacting fiscal 2025 results. The Zacks Consensus Estimate for fiscal 2025 earnings per share (EPS) has moved down 22.3% to $3.06 in the past 30 days. This downward adjustment reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.
EL’s stock has declined by 26.2% in the past three months against the industry’s 9.7% growth and the Zacks Consumer Staples sector's 5.7% increase during the same period.
Let’s delve deeper.
Image Source: Zacks Investment Research
Weakness in the Asia-Pacific Region Concerns EL
In fiscal 2024, the Asia-Pacific region, especially mainland China, encountered significant challenges, reflecting broader weakness in the prestige beauty sector. The Estee Lauder Companies’ sales in the Asia-Pacific region dropped 7% to $1.205 billion in the fourth quarter of fiscal 2024, primarily due to declining performance in mainland China. The retail sales trend worsened, falling from mid-single digits in the fiscal third quarter to low-double digits. The downside was caused by low consumer confidence and cautious spending. The Asia travel retail market also struggled, with Hainan registering a 40% sales drop. Weaker consumer sentiment, reduced basket sizes and a shift toward experiential spending contributed to these declines. For the fiscal 2025, the outlook remains tough, with a slow recovery in China and Asia travel retail that is expected to dent sales growth and profitability.
EL Vulnerable to Currency Rate Fluctuations
Thanks to The Estee Lauder Companies’ solid international presence, it remains exposed to unfavorable currency fluctuations. Any adverse currency fluctuation will likely dent the company’s operating performance. Currency headwinds are likely to affect EPS by nearly 3 cents in the fiscal 2025.
Challenging Road Ahead for The Estee Lauder Companies
EL projects a more restrained performance compared with the industry average during the fiscal 2025, largely due to its substantial business presence in mainland China and Asia travel retail.
Management is closely watching risks related to retailer destocking and weak consumer sentiment, which are impacting the prestige beauty market. Changing traveler behaviors and increased competition, particularly in North America, add to challenges. The company anticipates a challenging first-quarter fiscal 2025, with expected year-over-year declines in reported and organic net sales of 5-3%. Adjusted EPS are projected to drop 89-17% to 1-9 cents due to ongoing difficulties in key markets and shifts in consumer spending.
Investors’ Guide for EL Stock
The Estee Lauder Companies is navigating a precarious path troubled by significant macroeconomic challenges, particularly in its critical Asia-Pacific markets. Persistent weakness in mainland China and the Asia travel retail sector, compounded by unfavorable currency fluctuations, paints a bleak picture of the company's near-term performance. The sharp downward revision in fiscal 2025 earnings estimates, coupled with the substantial stock underperformance, underscores the growing investor pessimism surrounding EL's ability to weather these headwinds. Given these factors, the outlook for The Estee Lauder Companies remains highly uncertain. Investors should approach the Zacks Rank #5 (Strong Sell) stock with caution.
3 Top-Ranked Staple Stocks
The Chef's Warehouse (CHEF - Free Report) , which distributes specialty food products, currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) is keen on providing high-quality baked items, developing strong brands, making innovations to improve capabilities and undertaking prudent acquisitions. It currently carries a Zacks Rank #2 (Buy).
The consensus estimate for Flowers Foods’ current financial-year sales and EPS implies growth of 1.1% and 4.2%, respectively, from the year-ago reported numbers. FLO has a trailing four-quarter average earnings surprise of 1.9%.
Nomad Foods (NOMD - Free Report) , carrying a Zacks Rank #2, manufactures and distributes frozen foods. NOMD has a trailing four-quarter earnings surprise of 3.1%, on average.
The Zacks Consensus Estimate for Nomad Foods’ current financial-year sales and earnings indicates growth of 4.3% and 11.5%, respectively, from the prior-year reported level.