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The Estee Lauder Companies (EL) Beats on Earnings in Q4
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The Estee Lauder Companies Inc. (EL - Free Report) reported fourth-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate. However, net sales and earnings declined year over year.
As The Estee Lauder Companies enters fiscal 2023, it is witnessing record inflation, supply chain disruptions, unfavorable currency rates and risk of a slowdown in several markets worldwide. Nevertheless, management is optimistic about the growth opportunities in global prestige beauty.
The Estee Lauder Companies Inc. Price, Consensus and EPS Surprise
The company posted adjusted earnings of 42 cents per share, which surpassed the Zacks Consensus Estimate of 32 cents. However, the bottom line slumped 46% (down 45% at constant currency or cc) year over year.
Net sales of $3,561 million beat the Zacks Consensus Estimate of $3,435.7 million. However, the metric declined 10% (down 7% at cc) from $3,936 million reported in the year-ago quarter. Organic net sales fell 8% in the quarter. Management highlighted that solid growth in The Americas resulting from better foot traffic in brick-and-mortar fueled net sales growth in every category. This was more than offset by the unfavorable impacts of higher COVID-associated restrictions across China, negatively impacting travel and retail traffic. It also resulted in temporarily restricted capacity at its Shanghai distribution units. Apart from this, the company suspended commercial activities across Russia and Ukraine due to the invasion of Ukraine. The move resulted in lower net sales across Asia/Pacific and EMEA.
Gross profit came in at $2,530 million, down 14% year over year. The gross margin contracted to 71% from 74.9% reported in the year-ago quarter.
The company reported an operating income of $79 million, down from $234 million reported in the year-ago quarter. Operating income margin came in at 2.2%, down from 5.9% reported in the year-ago quarter.
Product-Based Segment Results
Skin Care’s sales were down 21% year over year (down 18% at cc) to $1,883 million. Makeup revenues increased 3% year over year (up 7% at cc) to $993 million. In the Fragrance category, revenues surged 16% year over year (up 22% at cc) to $521 million. Hair Care sales totaled $156 million, up 2% (up 5% at cc).
Regional Results
Sales in the Americas rose 12% year over year (up 11% at cc) to $1,076 million. Revenues in Europe, the Middle East & Africa region decreased 11% (down 7% at cc) to $1,480 million. In the Asia-Pacific region, sales declined 23% (down 19% at cc) to $1,006 million.
Other Updates
The Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of $3,957 million, long-term debt of $5,144 million and total equity of $5,590 million.
Net cash flow provided by operating activities for 12 months ended Jun 30, 2022, came in at $3,040 million. The company returned $3.15 billion in cash to shareholders through dividend payouts and share repurchases.
In a separate press release, the company declared a quarterly dividend of 60 cents per share on Class A and Class B shares. The dividend will be paid out on Sep 15, 2022, to shareholders of record as of Aug 31.
COVID-19 Update
Management highlighted that COVID-19 continued affecting the company’s operating environment worldwide, mainly affecting inventory levels, supply chain and other logistics in fiscal 2022. The resurgence of coronavirus cases across several Chinese provinces resulted in restrictions during the end of the fiscal third quarter, which continued through the end of the fiscal year. Retail traffic, travel and distribution capabilities were temporarily restricted.
Image Source: Zacks Investment Research
Guidance
For fiscal 2023, management projects net sales to increase in the band of 3- 5% year over year, which includes unfavorable currency impact. The guidance includes an unfavorable impact of 1% from the termination of its license agreements for the Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna product lines effective Jun 30, 2022. The view also reflects a 1% adverse impact associated with Russia and Ukraine situation. Organic net sales are anticipated to increase 7-9% year over year in fiscal 2023. Adjusted earnings per share (EPS) are anticipated to grow in the band of 5- 7% on a cc basis.
For the first quarter of fiscal 2023, management expects net sales to decline in the band of 10-8% year over year. The guidance includes adverse impacts from termination of certain license agreements, the adverse impact associated with Russia and Ukraine and unfavorable currency translations. Organic net sales are anticipated to decrease in the range of 4-6% in the fiscal first quarter. Quarterly adjusted EPS earnings are anticipated to decline 34-28% at cc.
EL’s shares increased 17.5% in the past three months compared with the industry’s 14.3% growth.
Inter Parfums is engaged in the manufacturing, distribution and marketing of a wide range of fragrances and related products. IPAR currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and EPS suggests growth of 14.9% and 18.6%, respectively, from the year-ago period’s reported figures. IPAR has a trailing four-quarter earnings surprise of 31.1%, on average.
e.l.f. Beauty, a cosmetic company, currently has a Zacks Rank #2 (Buy). ELF has a trailing four-quarter earnings surprise of almost 77%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and EPS suggests growth of 16.8% and almost 6%, respectively, from the year-ago period’s reported figures.
United Natural Foods distributes natural, organic, specialty, produce and conventional grocery and non-food products. UNFI currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for UNFI’s current financial year sales suggests 7.6% growth from the year-ago period’s reported figures. United Natural Foods has a trailing four-quarter earnings surprise of 29.9%, on average.
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The Estee Lauder Companies (EL) Beats on Earnings in Q4
The Estee Lauder Companies Inc. (EL - Free Report) reported fourth-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate. However, net sales and earnings declined year over year.
As The Estee Lauder Companies enters fiscal 2023, it is witnessing record inflation, supply chain disruptions, unfavorable currency rates and risk of a slowdown in several markets worldwide. Nevertheless, management is optimistic about the growth opportunities in global prestige beauty.
The Estee Lauder Companies Inc. Price, Consensus and EPS Surprise
The Estee Lauder Companies Inc. price-consensus-eps-surprise-chart | The Estee Lauder Companies Inc. Quote
Quarter in Detail
The company posted adjusted earnings of 42 cents per share, which surpassed the Zacks Consensus Estimate of 32 cents. However, the bottom line slumped 46% (down 45% at constant currency or cc) year over year.
Net sales of $3,561 million beat the Zacks Consensus Estimate of $3,435.7 million. However, the metric declined 10% (down 7% at cc) from $3,936 million reported in the year-ago quarter. Organic net sales fell 8% in the quarter. Management highlighted that solid growth in The Americas resulting from better foot traffic in brick-and-mortar fueled net sales growth in every category. This was more than offset by the unfavorable impacts of higher COVID-associated restrictions across China, negatively impacting travel and retail traffic. It also resulted in temporarily restricted capacity at its Shanghai distribution units. Apart from this, the company suspended commercial activities across Russia and Ukraine due to the invasion of Ukraine. The move resulted in lower net sales across Asia/Pacific and EMEA.
Gross profit came in at $2,530 million, down 14% year over year. The gross margin contracted to 71% from 74.9% reported in the year-ago quarter.
The company reported an operating income of $79 million, down from $234 million reported in the year-ago quarter. Operating income margin came in at 2.2%, down from 5.9% reported in the year-ago quarter.
Product-Based Segment Results
Skin Care’s sales were down 21% year over year (down 18% at cc) to $1,883 million. Makeup revenues increased 3% year over year (up 7% at cc) to $993 million. In the Fragrance category, revenues surged 16% year over year (up 22% at cc) to $521 million. Hair Care sales totaled $156 million, up 2% (up 5% at cc).
Regional Results
Sales in the Americas rose 12% year over year (up 11% at cc) to $1,076 million. Revenues in Europe, the Middle East & Africa region decreased 11% (down 7% at cc) to $1,480 million. In the Asia-Pacific region, sales declined 23% (down 19% at cc) to $1,006 million.
Other Updates
The Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of $3,957 million, long-term debt of $5,144 million and total equity of $5,590 million.
Net cash flow provided by operating activities for 12 months ended Jun 30, 2022, came in at $3,040 million. The company returned $3.15 billion in cash to shareholders through dividend payouts and share repurchases.
In a separate press release, the company declared a quarterly dividend of 60 cents per share on Class A and Class B shares. The dividend will be paid out on Sep 15, 2022, to shareholders of record as of Aug 31.
COVID-19 Update
Management highlighted that COVID-19 continued affecting the company’s operating environment worldwide, mainly affecting inventory levels, supply chain and other logistics in fiscal 2022. The resurgence of coronavirus cases across several Chinese provinces resulted in restrictions during the end of the fiscal third quarter, which continued through the end of the fiscal year. Retail traffic, travel and distribution capabilities were temporarily restricted.
Image Source: Zacks Investment Research
Guidance
For fiscal 2023, management projects net sales to increase in the band of 3- 5% year over year, which includes unfavorable currency impact. The guidance includes an unfavorable impact of 1% from the termination of its license agreements for the Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna product lines effective Jun 30, 2022. The view also reflects a 1% adverse impact associated with Russia and Ukraine situation. Organic net sales are anticipated to increase 7-9% year over year in fiscal 2023. Adjusted earnings per share (EPS) are anticipated to grow in the band of 5- 7% on a cc basis.
For the first quarter of fiscal 2023, management expects net sales to decline in the band of 10-8% year over year. The guidance includes adverse impacts from termination of certain license agreements, the adverse impact associated with Russia and Ukraine and unfavorable currency translations. Organic net sales are anticipated to decrease in the range of 4-6% in the fiscal first quarter. Quarterly adjusted EPS earnings are anticipated to decline 34-28% at cc.
EL’s shares increased 17.5% in the past three months compared with the industry’s 14.3% growth.
Stocks to Consider
Some better-ranked stocks are Inter Parfums (IPAR - Free Report) , e.l.f. Beauty (ELF - Free Report) and United Natural Foods (UNFI - Free Report) .
Inter Parfums is engaged in the manufacturing, distribution and marketing of a wide range of fragrances and related products. IPAR currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and EPS suggests growth of 14.9% and 18.6%, respectively, from the year-ago period’s reported figures. IPAR has a trailing four-quarter earnings surprise of 31.1%, on average.
e.l.f. Beauty, a cosmetic company, currently has a Zacks Rank #2 (Buy). ELF has a trailing four-quarter earnings surprise of almost 77%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and EPS suggests growth of 16.8% and almost 6%, respectively, from the year-ago period’s reported figures.
United Natural Foods distributes natural, organic, specialty, produce and conventional grocery and non-food products. UNFI currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for UNFI’s current financial year sales suggests 7.6% growth from the year-ago period’s reported figures. United Natural Foods has a trailing four-quarter earnings surprise of 29.9%, on average.