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Estee Lauder (EL) to Report Q1 Earnings: What's in Store?

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The Estee Lauder Companies Inc. (EL - Free Report) is likely to post a decline in the top and the bottom line when it reports first-quarter fiscal 2021 numbers on Nov 2. Though the Zacks Consensus Estimate for fiscal first-quarter earnings has moved up by a cent over the past 30 days to 88 cents per share, it suggests a 47.3% drop from the year-ago quarter’s reported figure. We note that this cosmetics giant has a trailing four-quarter negative earnings surprise of 36.5%, on average.

The consensus estimate for quarterly revenues is pegged at $3.47 billion, which suggests a decline of 10.9% from the prior-year quarter’s tally.

Factors to Note

Due to the coronavirus outbreak, Estee Lauder had temporarily closed stores in several regions. While the company reopened stores in a phased manner as coronavirus-induced restrictions were being lifted, the temporary closure of few stores at some point in the fiscal first quarter is likely to have dented performance. At the end of June, nearly 15% of the stores were shut in Europe, the Middle East & Africa. Further, nearly 20% of the stores remained closed in the Americas at the end of June.

On its last earnings call, management stated that as part of its two-year Post-COVID Business Acceleration Program, the company plans to reduce retail footprint, especially in Europe, the Middle East & Africa and in North America regions. Notably, the plan was expected to start during the fiscal first quarter. Apart from this, restrictions in the travel retail business amid the pandemic are likely to have dented the company’s performance in the to-be-reported quarter.

For the fiscal first quarter, the company projects revenue decline in the band of 12-13%.  Also management expects adverse currency impact of 1% on sales in the quarter. Further, adjusted earnings are anticipated between 80 cents and 85 cents in the quarter under review.

Nevertheless, the company is undertaking several actions to curb expenses like suspending travel, meetings, consulting, non-essential recruits and cutting certain employee costs amid COVID-19. Also, the Dr. Jart+ acquisition is expected to have had contributed nearly 2.5% to sales in the fiscal first quarter. Apart from these, 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 earnings season. 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 has a Zacks Rank #3 and an Earnings ESP of +4.57%.

Other Stocks With Favorable Combination

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

Church & Dwight (CHD - Free Report) has an Earnings ESP of +1.80% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hershey Company (HSY - Free Report) currently has an Earnings ESP of +1.63% and a Zacks Rank #3.

Medifast (MED - Free Report) currently has an Earnings ESP of +1.54% and a Zacks Rank of 3.

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