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Estee Lauder (EL) Q4 Earnings Beat Estimates, Sales Up Y/Y
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The Estee Lauder Companies Inc. (EL - Free Report) reported fourth-quarter fiscal 2023 results, with the top and bottom lines coming ahead of the Zacks Consensus Estimate. However, the bottom line declined year over year. Shares of the company were down more than 6% in the pre-market trading session on Aug 18.
Fiscal 2023 net sales descended 10% to $15.9 billion, with the adjusted earnings per share (EPS) of $3.46 tumbling 49% on a constant currency or cc basis. Results were largely hurt by softness in Asia travel retail (mainly in Hainan and Korea), somewhat compensated by improvements in nearly all other regions. The operating landscape in fiscal 2023 continued to bear hurdles associated with the pandemic, especially in Asia travel retail and mainland China, wherein the recovery was slower than anticipated.
However, management remains positive about the future prospects of global prestige beauty. This, along with a robust brand position, keeps the company well-placed for diversified growth in its portfolio.
Quarter in Detail
The company posted adjusted earnings of 7 cents per share, which came much ahead of the Zacks Consensus Estimate of a loss of 4 cents. However, the bottom line slumped significantly from earnings of 42 cents reported in the year-ago period. Adjusted EPS came in at 11 cents at cc.
The Estee Lauder Companies Inc. Price, Consensus and EPS Surprise
Net sales of $3,609 million beat the Zacks Consensus Estimate of $3,479.5 million. The metric climbed nearly 1% from $3,561 million reported in the year-ago quarter. Organic net sales grew 4%, mainly due to a solid increase in Asia/Pacific, wherein the company saw double-digit growth in all categories and markets continued to recover.
Organic sales growth was backed by strength in the Makeup, Fragrance and Hair Care categories, along with a robust increase in the company’s global emerging markets. The Skin Care category witnessed softness due to hurdles in the company’s travel retail business in Asia.
The adjusted gross profit came in at $2,467 million, down 3% year over year. The adjusted operating income came in at $71 million, down 66% from $207 million reported in the year-ago period.
Product-Based Segment Results
Skin Care’s sales were down 5% year over year to $1,794 million. Makeup revenues jumped 12% year over year to $1,108 million. In the Fragrance category, revenues were up 5% at $545 million. Hair Care sales totaled $164 million, up 5%.
Regional Results
Sales in the Americas remained flat year over year at $1,071 million. Revenues in the EMEA region declined 15% to $1,253 million. In the Asia-Pacific region, sales surged 29% to $1,302 million.
Other Updates
The company exited the quarter with cash and cash equivalents of $4,029 million, long-term debt of $7,117 million and total equity of $5,585 million.
Net cash flow provided by operating activities for fiscal 2023 was $1,731 million, and capital expenditures amounted to $1 billion. The company returned $1.2 billion in cash to shareholders through dividend payouts and share repurchases during the fiscal. In fiscal 2024, net cash provided by operating activities is likely to be $1.7-$1.8 billion. Capital expenditures are expected to be about 6% of the forecasted sales.
In a separate press release, the company declared a quarterly dividend of 66 cents per share on Class A and Class B shares. The dividend will be paid out on Sep 15, 2023 to shareholders of record as of Aug 31. Management expects to maintain its quarterly dividend payout at the current level in fiscal 2024, while it announced the suspension of its share buyback plan.
On Apr 28, 2023, Estee Lauder concluded the buyout of the TOM FORD brand for about $2.28 billion.
Guidance
Management remains focused on speeding up growth across regions, brands, product categories and channels as it enters fiscal 2024. EL expects to revert to organic net sales growth and witness progressive margin recovery in fiscal 2024. The company is focused on fueling momentum in regions that are performing well, alongside re-accelerating North America growth. It is also taking actions to improve the Asia travel retail business.
Moving on, Estee Lauder plans to make continued strategic investments, such as innovation, speeding up retail growth in Asia travel retail, advertising, growth in emerging markets and concluding its first manufacturing facility in Asia. These are likely to help support business recovery and fuel share gains.
That said, management remains cautious about economic hurdles in China, volatile inflation levels, foreign currency fluctuations and concerns surrounding recession (in several global markets).
For fiscal 2024, management projects net sales to increase 3-5% year over year, including an unfavorable currency impact of 1%. The view includes anticipations of sequential improvements in quarterly net sales growth. Organic net sales growth is anticipated in the range of 6-8%.
Management envisions gross margin expansion in fiscal 2024, backed by prudent price hikes, lower discounts and reduced obsolescence charges. The gross margin is likely to contract in the first half of fiscal 2024, which is expected to be more than offset by expansion in the second half.
Further, management expects a sequential improvement in the operating margin throughout fiscal 2024, with higher growth in the second half. This can be accountable to the pace of improvement in the travel retail business in Asia.
Adjusted EPS, excluding restructuring and other charges, is expected in the band of $3.50-$3.75, suggesting growth from $3.46 reported in fiscal 2023. Currency headwinds are likely to affect net EPS by nearly 11 cents. Adjusted EPS is expected to grow 4-12% at cc.
For the first quarter of fiscal 2024, Estee Lauder anticipates reported and organic net sales to decline 12%-10% year over year. The bottom line is envisioned in the band of a loss of 31 cents per share and a loss of 21 cents in the first quarter. On a cc basis, the bottom line is likely to range between a loss of 29 cents and a loss of 19 cents per share.
This Zacks Rank #5 (Strong Sell) stock has declined 18.9% in the past three months compared with the industry’s fall of 10.7%.
The Zacks Consensus Estimate for Post Holdings’ current fiscal year sales and earnings suggests growth of 13.5% and 184.5%, respectively, from the corresponding year-ago reported figures.
Helen of Troy (HELE - Free Report) , a provider of several consumer products, currently has a Zacks Rank #2 (Buy). HELE’s expected EPS growth rate for three to five years is 8%.
The Zacks Consensus Estimate for Helen of Troy’s current fiscal year sales suggests a decline of 2.9% from the year-ago reported numbers. HELE has a trailing four-quarter earnings surprise of 8.1% on average.
Inter Parfums (IPAR - Free Report) , which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently carries a Zacks Rank #2. IPAR has an expected EPS growth rate of 15% for three to five years.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 19.7% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.9%, on average.
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Estee Lauder (EL) Q4 Earnings Beat Estimates, Sales Up Y/Y
The Estee Lauder Companies Inc. (EL - Free Report) reported fourth-quarter fiscal 2023 results, with the top and bottom lines coming ahead of the Zacks Consensus Estimate. However, the bottom line declined year over year. Shares of the company were down more than 6% in the pre-market trading session on Aug 18.
Fiscal 2023 net sales descended 10% to $15.9 billion, with the adjusted earnings per share (EPS) of $3.46 tumbling 49% on a constant currency or cc basis. Results were largely hurt by softness in Asia travel retail (mainly in Hainan and Korea), somewhat compensated by improvements in nearly all other regions. The operating landscape in fiscal 2023 continued to bear hurdles associated with the pandemic, especially in Asia travel retail and mainland China, wherein the recovery was slower than anticipated.
However, management remains positive about the future prospects of global prestige beauty. This, along with a robust brand position, keeps the company well-placed for diversified growth in its portfolio.
Quarter in Detail
The company posted adjusted earnings of 7 cents per share, which came much ahead of the Zacks Consensus Estimate of a loss of 4 cents. However, the bottom line slumped significantly from earnings of 42 cents reported in the year-ago period. Adjusted EPS came in at 11 cents at cc.
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
Net sales of $3,609 million beat the Zacks Consensus Estimate of $3,479.5 million. The metric climbed nearly 1% from $3,561 million reported in the year-ago quarter. Organic net sales grew 4%, mainly due to a solid increase in Asia/Pacific, wherein the company saw double-digit growth in all categories and markets continued to recover.
Organic sales growth was backed by strength in the Makeup, Fragrance and Hair Care categories, along with a robust increase in the company’s global emerging markets. The Skin Care category witnessed softness due to hurdles in the company’s travel retail business in Asia.
The adjusted gross profit came in at $2,467 million, down 3% year over year. The adjusted operating income came in at $71 million, down 66% from $207 million reported in the year-ago period.
Product-Based Segment Results
Skin Care’s sales were down 5% year over year to $1,794 million. Makeup revenues jumped 12% year over year to $1,108 million. In the Fragrance category, revenues were up 5% at $545 million. Hair Care sales totaled $164 million, up 5%.
Regional Results
Sales in the Americas remained flat year over year at $1,071 million. Revenues in the EMEA region declined 15% to $1,253 million. In the Asia-Pacific region, sales surged 29% to $1,302 million.
Other Updates
The company exited the quarter with cash and cash equivalents of $4,029 million, long-term debt of $7,117 million and total equity of $5,585 million.
Net cash flow provided by operating activities for fiscal 2023 was $1,731 million, and capital expenditures amounted to $1 billion. The company returned $1.2 billion in cash to shareholders through dividend payouts and share repurchases during the fiscal. In fiscal 2024, net cash provided by operating activities is likely to be $1.7-$1.8 billion. Capital expenditures are expected to be about 6% of the forecasted sales.
In a separate press release, the company declared a quarterly dividend of 66 cents per share on Class A and Class B shares. The dividend will be paid out on Sep 15, 2023 to shareholders of record as of Aug 31. Management expects to maintain its quarterly dividend payout at the current level in fiscal 2024, while it announced the suspension of its share buyback plan.
On Apr 28, 2023, Estee Lauder concluded the buyout of the TOM FORD brand for about $2.28 billion.
Guidance
Management remains focused on speeding up growth across regions, brands, product categories and channels as it enters fiscal 2024. EL expects to revert to organic net sales growth and witness progressive margin recovery in fiscal 2024. The company is focused on fueling momentum in regions that are performing well, alongside re-accelerating North America growth. It is also taking actions to improve the Asia travel retail business.
Moving on, Estee Lauder plans to make continued strategic investments, such as innovation, speeding up retail growth in Asia travel retail, advertising, growth in emerging markets and concluding its first manufacturing facility in Asia. These are likely to help support business recovery and fuel share gains.
That said, management remains cautious about economic hurdles in China, volatile inflation levels, foreign currency fluctuations and concerns surrounding recession (in several global markets).
For fiscal 2024, management projects net sales to increase 3-5% year over year, including an unfavorable currency impact of 1%. The view includes anticipations of sequential improvements in quarterly net sales growth. Organic net sales growth is anticipated in the range of 6-8%.
Management envisions gross margin expansion in fiscal 2024, backed by prudent price hikes, lower discounts and reduced obsolescence charges. The gross margin is likely to contract in the first half of fiscal 2024, which is expected to be more than offset by expansion in the second half.
Further, management expects a sequential improvement in the operating margin throughout fiscal 2024, with higher growth in the second half. This can be accountable to the pace of improvement in the travel retail business in Asia.
Adjusted EPS, excluding restructuring and other charges, is expected in the band of $3.50-$3.75, suggesting growth from $3.46 reported in fiscal 2023. Currency headwinds are likely to affect net EPS by nearly 11 cents. Adjusted EPS is expected to grow 4-12% at cc.
For the first quarter of fiscal 2024, Estee Lauder anticipates reported and organic net sales to decline 12%-10% year over year. The bottom line is envisioned in the band of a loss of 31 cents per share and a loss of 21 cents in the first quarter. On a cc basis, the bottom line is likely to range between a loss of 29 cents and a loss of 19 cents per share.
This Zacks Rank #5 (Strong Sell) stock has declined 18.9% in the past three months compared with the industry’s fall of 10.7%.
Solid Consumer Staple Bets
Post Holdings (POST - Free Report) , a consumer-packaged goods holding company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 59.6% on average. You can see the complete list of today’s Zacks #1 Rank stocks here
The Zacks Consensus Estimate for Post Holdings’ current fiscal year sales and earnings suggests growth of 13.5% and 184.5%, respectively, from the corresponding year-ago reported figures.
Helen of Troy (HELE - Free Report) , a provider of several consumer products, currently has a Zacks Rank #2 (Buy). HELE’s expected EPS growth rate for three to five years is 8%.
The Zacks Consensus Estimate for Helen of Troy’s current fiscal year sales suggests a decline of 2.9% from the year-ago reported numbers. HELE has a trailing four-quarter earnings surprise of 8.1% on average.
Inter Parfums (IPAR - Free Report) , which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently carries a Zacks Rank #2. IPAR has an expected EPS growth rate of 15% for three to five years.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 19.7% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.9%, on average.