Key points
- Estée Lauder is a global cosmetics company with more than 20 prestige brands, including Clinique, La Mer, Bobbi Brown and MAC Cosmetics.
- The company’s restructuring plan calls for a workforce reduction of 3% to 5% and charges of between $500 million and $700 million.
- The company raised its forecast for incremental operating earnings over its earnings recovery plan from $1.1 billion to $1.4 billion, up from $800 million to $1 billion in previous estimates.
- 5 stocks we prefer to those of Estée Lauder Companies
Iconic company of prestige beauty products Estée Lauder Co. Inc. NYSE:EL could right its ship, as evidenced by its latest earnings report. The consumer discretionary company offers skin care, fragrances, hair products and makeup through more than 20 well-known brands, including AVEDA, Aramis, Bobbi Brown Cosmetics, La Mer, Too Faced and DECIEM.
I like department stores Macy’s Inc. NYSE:M AND Nordstrom Inc. New York Stock Exchange: JWNspecialty beauty stores like Sephora and Ulta Beauty Inc. NASDAQ:ULTA carry its beauty products and consumers can purchase directly from various brand websites.
Prestigious iconic brands
Estée Lauder is known for its high-end prestige brands. Its namesake, Estée Lauder, is a luxury skincare and makeup brand. Clinique is a custom line of skin care and makeup products developed by dermatologists by Dr. Norman Orentreich 50 years ago.
MAC Cosmetics is professional quality makeup. La Mer is a high-end luxury skincare line offering anti-aging, tinted makeup and sun protection products for women and men. He is known for his signature “Miracle Broth”.
Its Genaissance De Mer Essence Serum with Crystal Miracle Brother retails for $860. Bobbi Brown Cosmetics is an iconic, natural-looking, clean-looking cosmetics brand. The company competes with Coty Inc. NYSE:COTY AND elf beauty inc. NYSE: ELF.
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Strong EPS beat
On February 5, 2024, Estée Lauder reported fiscal second-quarter 2024 earnings per share of 88 cents, beating consensus analyst estimates of 34 cents. Net income fell to $313 million, compared to $394 million in the same period a year earlier. The effective tax rate was 37.6% versus 25.4% in the same period a year ago.
The higher tax rate is due to its foreign operations and geographic earnings mix. Revenue fell 7.4% year-over-year (YoY) to $4.28 billion, beating analysts’ estimates of $4.19 billion. Organic net sales decreased 8% year-over-year due to continued weakness in the travel retail sector in Asia, particularly in mainland China.
Sales forecast
Estée Lauder expects third-quarter fiscal 2024 net sales to grow between 3% and 5%. A 1% unfavorable impact from forex and a 1% headwind from potential business disruptions in Israel and parts of the Middle East are expected. Organic net sales are expected to increase 4% to 6%. The company expects earnings per share of 39 cents to 49 cents and revenue of $3.87 billion to $3.94 billion.
The fiscal full-year 2024 EPS forecast is expected to be between $2.15 and $2.30, with revenue expected to increase at 1% or $15.74 billion to $16.14 billion versus to the $15.65 billion consensus analysts estimated. Obtain AI-powered insights on MarketBeat.
The restyling plan strengthens investor sentiment
While the EPS pace was impressive, guidance was flat. However, shares have fallen significantly short of the company’s earnings recovery plan, improved gross margin, reduced overhead and lowered its cost base, while rebuilding stronger, more sustained profitability.
The restructuring and restyling plan will begin in the third quarter of fiscal 2024 through the end of fiscal 2026. The company will cut 3% to 5% of its workforce. The company will incur restructuring charges of between $500 million and $700 million once implementation is complete.
The benefits will occur in fiscal years 2025 through 2026
The program is expected to produce gross annual benefits of between $350 million and $700 million before taxes. Estée Lauder expects to achieve incremental operating profits of $1.1 billion to $1.4 billion, from the original $800 million to $1.1 billion previously expected.
Benefit realization will materialize in fiscal years 2025 and 2026, and more than half is expected to accrue to fiscal 2025 operating profitability.
Fabrizio Freda, CEO of Estée Lauder, commented on the conference call: “Bottom line, we are at an inflection point, ready to return to organic sales growth in the second half and deliver sequentially stronger profitability than the first half, as well as expansion compared to the previous year. ago.”
Freda concluded: “We are well positioned to deliver increased profitability in fiscal 2025 and 2026, given the initial progress we have made with our earnings recovery plan and its new restructuring program, and we are well positioned to invest in consumer-facing investments”. areas to seize exciting growth opportunities in the global prestige beauty sector.”
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Weekly seed wave breakout
The weekly candlestick chart for EL illustrates a bullish seed wave pattern. A seed wave is a rare pattern composed of an MSL #1 trigger. 1 (MSL1) market structure low at $118.41 and an MSL trigger no. 2 (MSL2) higher at $134.90.
When they occur, it establishes three distinct price objectives called potential reversal zones (PRZs) based on three Fibonacci extension (fib) ratios of 1.27 at $175.31, 1.414 at $183.56 and 1.618 at $195 .41 of the length of MSL n. 1. the low at $101.68 and the shooting star high at $151.19 at the top of the candlestick sequence.
The seed wave is triggered when EL breaks above the high of $151.19. The earnings gap at $159.75 initially attempted to trigger, but eventually widened and fell to close at $143.34. The weekly relative strength index (RSI) is slowly rising towards the 50 band. The pullback support levels are $140.49, $134.90, $126.57, and $118.41.
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