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Estee Lauder (EL) to Post Q2 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 second-quarter fiscal 2021 numbers on Feb 5. Though the Zacks Consensus Estimate for fiscal second-quarter earnings has moved up by a cent in the past seven days to $1.66 per share, it suggests a 21.3% slump from the year-ago quarter’s reported figure. We note that this cosmetics giant has a trailing four-quarter negative earnings surprise of 22.6%, on average.

The consensus estimate for quarterly revenues is pegged at $4.48 billion, which suggests a decline of 3.1% from the prior-year quarter’s tally.

The Estee Lauder Companies Inc. Price and EPS Surprise

 

The Estee Lauder Companies Inc. Price and EPS Surprise

The Estee Lauder Companies Inc. price-eps-surprise | The Estee Lauder Companies Inc. Quote

 

Factors to Note

Estee Lauder is bearing the brunt of coronavirus-induced hurdles like soft store traffic. Management, in its last earnings call, highlighted that restrictions on travel due to government orders and consumer health concerns amid COVID-19 has been hurting consumer traffic in most travel retail locations. As part of its two-year Post-COVID Business Acceleration Program introduced in August 2020, the company had unveiled plans to reduce retail footprint. Through this plan, management expected shutting 10-15% of its freestanding stores worldwide along with various low-performing department store counters. Also, the company mentioned that various retailers decided to undertake planned reduction of their footprint via door closures amid the pandemic.

For the fiscal second quarter, Estee Lauder projects revenue decline in the band of 5-3% that includes a contribution of nearly 2% from Dr. Jart+ acquisition and a positive currency impact of 1%. Excluding these, management expects net sales decrease of 8-6% in the quarter under review. Further, adjusted earnings are anticipated between $1.45 and $1.60 per share in the fiscal second quarter. Excluding share dilution related to the acquisition, management expects 31-24% decline in adjusted earnings per share at constant currency.

Nevertheless, Estee Lauder has been undertaking several actions to curb expenses amid the crisis. These include costs related to advertising and promotion activities, travel, meetings, consulting and certain employee expenses. Apart from these, the company’s focus on augmenting its e-commerce business as well as strength in the Skin Care portfolio 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 +1.00%.

More Stocks With Favorable Combinations

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

The Hershey Company (HSY - Free Report) currently has an Earnings ESP of +1.79% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Clorox Company (CLX - Free Report) currently has an Earnings ESP of +0.30% and a Zacks Rank of 3.

Kellogg Company (K - Free Report) currently has an Earnings ESP of +0.15% and carries a Zacks Rank #3.

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