With a market cap of $23.1 billion, The Estée Lauder Companies Inc. (EL) is a global leader in manufacturing and marketing premium skin care, makeup, fragrance, and hair care products, offering brands like Estée Lauder, Clinique, M·A·C, and La Mer. Based in New York, the company sells its products through department stores, specialty retailers, e-commerce platforms, and travel retail locations worldwide.
Shares of the beauty products company have significantly underperformed the broader market over the past 52 weeks. EL has dropped 56.1% over this time frame, while the broader S&P 500 Index ($SPX) has gained 22.8%. On a YTD basis, shares of EL are down 14.3%, compared to SPX’s 3.4% increase.
Narrowing the focus, EL has also lagged behind the Consumer Staples Select Sector SPDR Fund’s (XLP) 7.6% rise over the past 52 weeks and 1.1% return on a YTD basis.
Despite reporting better-than-expected Q2 adjusted EPS of $0.62 and revenue of $4 billion, Estée Lauder's shares plunged over 16% on Feb. 4. The company projected a steep 10% - 12% decline in Q3 net sales and a sharp 69% - 79% drop in adjusted EPS to $0.20 - $0.30, citing continued weakness in Asia travel retail, soft consumer sentiment in China and Korea, and global geopolitical uncertainty. Additionally, adjusted operating margin fell 200 basis points to 11.5% due to sales volume deleverage, and the company announced a major restructuring, with plans to cut 5,800 jobs - 7,000 jobs to restore profitability.
For the current fiscal year, ending in June 2025, analysts expect EL’s EPS to decline 47.1% year-over-year to $1.37. However, the company’s earnings surprise history is promising. It beat the consensus estimates in the last four quarters.
Among the 28 analysts covering the stock, the consensus rating is a “Hold.” That’s based on four “Strong Buy” ratings, one “Moderate Buy,” and 23 “Holds.”
On Feb. 6, Barclays cut Estée Lauder's price target to $64, maintaining an “Equal-Weight” rating. The firm expects revenue declines for at least two more quarters despite the company's new strategic vision.
The mean price target of $81.08 represents a premium of 26.2% to EL’s current levels. The Street-high price target of $107 implies a potential upside of 66.5% from the current price.
