On Tuesday, Estee Lauder (NYSE:EL) shares received a revised price target from DA Davidson, now set at $130, down from the previous target of $191. The firm maintained a Buy rating on the company's stock.
The adjustment follows Estee Lauder's fourth-quarter fiscal year 2024 results, which exceeded expectations, particularly in travel retail, which likely saw an increase of over 40%, propelled by re-stocking efforts in Asian markets.
Despite the company's forecast for the first quarter of fiscal year 2025 falling short of analyst expectations, DA Davidson anticipates this will mark the third consecutive quarter of year-over-year operating profit growth for Estee Lauder.
However, the company has indicated that it expects continued declines in Mainland China and Asia travel retail, which account for approximately 30-35% of its sales, throughout fiscal year 2025.
In response to these projections, DA Davidson has revised its earnings per share (EPS) estimate for Estee Lauder, reducing it by $1.28, or 30%, to $2.95. This reduction includes a $0.22 decrease attributed to a higher tax rate.
Despite these adjustments, there are early signs of recovery, as Clinique, one of Estee Lauder's brands, has experienced growth in U.S. market share for three consecutive months through July.
The new price target of $130 is based on a multiple of 40 times the calendar year 2025 estimated EPS of $3.25, lowered from the previous estimate of $4.78. This valuation reflects DA Davidson's updated outlook on Estee Lauder's financial performance in the coming year.
InvestingPro Insights
As Estee Lauder navigates the dynamic landscape of the cosmetics industry, real-time data from InvestingPro provides additional context to the company's financial outlook. Estee Lauder has been successful in maintaining a streak of dividend payments for 29 consecutive years, highlighting its commitment to shareholder returns despite market fluctuations (InvestingPro Tip 5). Furthermore, the company's impressive gross profit margins are a testament to its pricing power and operational efficiency (InvestingPro Tip 1).
InvestingPro data also indicates that Estee Lauder's stock has experienced a notable decline over the past three months (InvestingPro Tip 9), which may present a buying opportunity for investors who believe in the company's long-term prospects. Additionally, despite a forecasted net income drop this year (InvestingPro Tip 4), analysts remain optimistic about Estee Lauder's ability to remain profitable (InvestingPro Tip 12).
For investors seeking a deeper dive into Estee Lauder's financial health and future prospects, InvestingPro offers a comprehensive list of additional tips, including analysis on earnings revisions, valuation multiples, and liquidity. To explore these insights and more, visit InvestingPro's dedicated Estee Lauder page (https://www.investing.com/pro/EL), which features a total of 14 InvestingPro Tips for a well-rounded investment perspective.
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