Evercore ISI maintained its Outperform rating and $130.00 price target for Estee Lauder (NYSE:EL), highlighting the company's recent performance in China's online market. Estee Lauder has seen a firm increase to low double-digit online sales in China, attributed to market share gains in skincare, particularly with its La Mer brand and the Re-Nutriv upgrade.
The analyst noted that while the first quarter of fiscal year 2025 shows a positive trend, it's important to consider the context. The months of July and August typically record lower sales and follow less successful promotional events. Additionally, there has been a decline in beauty product imports to China and Hainan, with a 6% drop observed so far.
Despite these challenges, Estee Lauder's improvement in online sales may reduce the risk of inventory destocking beyond the first quarter, aligning with current guidance and consensus expectations.
The company's success in regaining market share from L'Oréal Luxe in official channels, without resorting to promotions or price cuts, demonstrates the strong appeal of its brands and skincare technologies among Chinese consumers.
The analysis also acknowledges the potential for a flat growth trend in China, as indicated by Procter's comments on China reaching a mature stage and not likely to return to pre-pandemic growth rates. Nevertheless, the data supports the competitive strength of Estee Lauder's brands within the Chinese market.
Estee Lauder has been the subject of various analyst ratings and significant internal developments. Evercore ISI maintained an Outperform rating on the company, despite observing a contraction in China's cosmetic import trends. B.Riley initiated coverage on Estee Lauder's shares with a Neutral rating and a price target of $95.00, citing current market challenges.
Piper Sandler reiterated its Overweight rating on Estee Lauder, maintaining a price target of $114.00, while Bernstein SocGen Group revised its price target for Estee Lauder, lowering it to $100, maintaining a Market Perform rating.
Estee Lauder's Profit Recovery and Growth Plan aims to deliver between $1.1 and $1.4 billion in net profit over fiscal year 2024 levels. However, the first quarter fiscal year 2025 forecast fell short of expectations, leading DA Davidson to revise its earnings per share estimate for Estee Lauder, reducing it by $1.28, or 30%, to $2.95.
Lastly, in a significant move for the company, Haider Ackermann has been appointed as the new Creative Director for TOM FORD, a part of Estee Lauder's portfolio. This development is expected to drive the brand's expansion into its next phase.
InvestingPro Insights
Estee Lauder's financials and market performance offer additional context to the company's strategic moves in the Chinese market. With a market capitalization of $30.33 billion, Estee Lauder is trading at a high earnings multiple with a P/E ratio of 76.93, suggesting high investor expectations for future earnings growth. This is supported by an InvestingPro Tip indicating that net income is expected to grow this year. The company's gross profit margins stand at an impressive 71.67%, underscoring its operational efficiency and strong brand positioning, which may contribute to its resilience in the competitive Chinese online market.
Despite recent market volatility, with the stock trading near its 52-week low and experiencing a significant price drop over the last three months, Estee Lauder has maintained its dividend payments for 29 consecutive years, currently offering a dividend yield of 3.12%. This consistent dividend history, alongside a tip that Estee Lauder's liquid assets exceed short-term obligations, suggests a level of financial stability that could appeal to long-term investors.
For those interested in a more detailed analysis, there are additional InvestingPro Tips available that could provide further insight into Estee Lauder's financial health and stock performance. Visit https://www.investing.com/pro/EL to explore these exclusive tips and consider how they might inform your investment strategy.
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