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Here's How Estee Lauder (EL) Looks Ahead of Q4 Earnings

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The Estee Lauder Companies Inc. (EL - Free Report) is likely to post a decline in the top and bottom line when it reports fourth-quarter fiscal 2020 numbers on Aug 20. The Zacks Consensus Estimate for fourth-quarter loss has widened by a couple of cents in the past 30 days to 24 cents per share. This suggests deterioration from earnings of 64 cents registered in the year-ago quarter. We note that this cosmetics giant has a trailing four-quarter earnings surprise of 13.4%, on average. In the last reported quarter, the company delivered an earnings surprise of 18.1%.

The consensus estimate for quarterly revenues is pegged at $2.41 billion, which suggests a decline of 32.8% from the prior-year quarter’s tally.

Factors to Note

Due to the coronavirus outbreak, Estee Lauder had temporarily closed most of its retail stores (operated by the company as well as its customers) in several regions since mid-March. In its last earnings call, management stated that it expects majority of these stores to remain shut through most of fourth-quarter fiscal 2020. Temporary store closures along with restrictions in the travel retail business amid the pandemic are likely to have dented sales and margins in the to-be-reported quarter.

Nevertheless, the company is undertaking several actions to curb expenses like suspending travel, meetings, consulting, non-essential recruits and cutting certain employee costs. Also, Estee Lauder is resorting to other measures like salary cuts for senior executives and other management employees along with furloughing workers among others. In the last earnings call, management stated that it expects its saving efforts to have reduced operating expenses by $500-$600 million in the fourth quarter. Apart from this, the company’s focus on strengthening its e-commerce business bodes well.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Estee Lauder this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Estee Lauder carries a Zacks Rank #3 and an Earnings ESP of +50.56%.

Other Stocks With a Favorable Combination

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Dollar General (DG - Free Report) has an Earnings ESP of +6.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DICK’S Sporting Goods (DKS - Free Report) has an Earnings ESP of +34.65% and a Zacks Rank #3.

Lowe’s Companies (LOW - Free Report) has an Earnings ESP of +4.41% and a Zacks Rank #3.

5 Stocks Set to Double

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