On Thursday, Estee Lauder (NYSE:EL) maintained its hold stock rating by a market research firm due to concerns over the company's recovery pace in certain markets and high inventory levels. The firm's analysts pointed to Estee Lauder's less-than-expected financial guidance for the fiscal year 2024 (FY24) as a primary reason for the decision.
The firm has also adjusted its earnings per share (EPS) estimates for Estee Lauder for FY24 and FY25 downward, citing the expectation that earnings growth will not return to previous levels until at least the first quarter of fiscal year 2025 (1Q25). This revision follows the company's announcement of its financial outlook, which did not meet market expectations.
Estee Lauder's performance is closely tied to several factors, including its business recovery in China and the rebound of the travel retail segment. The market research firm indicated that a stronger-than-expected recovery in these areas could lead to a reassessment of Estee Lauder's stock rating.
The current hold rating suggests that the firm advises investors to maintain their positions in Estee Lauder shares without buying more or selling existing shares. This guidance comes as the company navigates a challenging market environment, with specific reference to the slow recovery in some regions and elevated inventory levels that could impact financial performance.
The firm has not provided a new stock price target for Estee Lauder's shares, instead focusing on the company's operational challenges and the timeline for potential earnings growth. The hold rating will remain in place until there are tangible signs of recovery that could justify a more optimistic outlook for the cosmetics giant.
InvestingPro Insights
Amid the cautious outlook presented by analysts, Estee Lauder (NYSE:EL) demonstrates financial resilience and strategic prowess. An InvestingPro Tip highlights the company's ability to consistently reward investors with dividends, having raised them for three consecutive years, and maintaining dividend payments for an impressive 29 consecutive years. This consistency in returning value to shareholders is a testament to the company's financial discipline and commitment to its investor base.
From a valuation standpoint, Estee Lauder is trading at a high earnings multiple, with a P/E Ratio of 77.47 and an adjusted P/E Ratio for the last twelve months as of Q3 2024 at 72.87. The company's robust gross profit margins, standing at 70.77%, underscore its ability to maintain profitability despite market challenges.
Still, analysts have revised their earnings expectations downwards for the upcoming period, indicating that while the company is profitable, there may be headwinds affecting future earnings growth.
For investors seeking a detailed analysis, there are over 10 additional InvestingPro Tips available, which can provide deeper insights into Estee Lauder's financial health and market position. Interested readers can take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, offering comprehensive data and expert analysis to inform investment decisions.
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