We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The Estee Lauder Companies (EL) Hurt by Softness in Asia Region
Read MoreHide Full Article
The Estee Lauder Companies Inc. (EL - Free Report) appears in a tight spot due to persistent weakness in Asia travel retail. The leading skincare, makeup, fragrance and hair care product provider’s international presence keeps it exposed to risks of unfavorable currency rates.
These factors put pressure on the company’s first-quarter fiscal 2024 performance. Management is cautious about incremental external headwinds like economic hurdles in China and foreign currency fluctuations, among others.
The Zacks Rank #5 (Strong Sell) stock has slumped 24.2% in the past six months compared with the industry’s 15.9% decline. The stock has underperformed the Zacks Consumer Staples’s decline of 3.4% during this time.
Let’s delve deeper.
Image Source: Zacks Investment Research
Softness in Asia Region a Concern
The Estee Lauder Companies has been bearing the brunt of weakness in the Asia travel retail and slower-than-anticipated recovery in the prestige beauty across mainland China. During first-quarter fiscal 2024, quarterly sales in the Asia-Pacific region fell 6% year over year to $1,058 million. Total company net sales also fell 10% to 3,518 million. Organic net sales dropped 11%, mainly due to softness in the Asia travel retail business and slower-than-anticipated recovery in the overall prestige beauty in mainland China.
Volatile Currency Movements
Thanks to The Estee Lauder Companies’ solid international presence, it remains exposed to unfavorable currency fluctuations. Any adverse currency fluctuation will likely dent the company’s operating performance. For the fiscal 2024, management projects an unfavorable currency impact of 1% on net sales. Currency headwinds are likely to affect net earnings per share (EPS) by nearly 16 cents in the fiscal 2024.
Road Ahead Looks Challenging
The Estee Lauder Companies is witnessing a slower growth rate in the Asia travel retail and overall prestige beauty in mainland China, which is also evident in the presale period of the 11.11 Shopping Festival. Another factor dampening the company’s outlook is the potential risks of more business disruptions across Israel and other regions of the Middle East. EL is also exposed to the dangers of unfavorable currency headwinds.
Well, slower-than-anticipated net sales and margin recovery stemming from incremental external headwinds prompted management to lower fiscal 2024 guidance. For the fiscal 2024, management projects net sales in the range of a 2% decline and a 1% increase. The company had earlier expected net sales to increase 3-5%. Adjusted earnings per share (EPS) are expected to decline 25-33% at constant currency or cc, against growth of 4-12% projected earlier.
For the second quarter of fiscal 2024, The Estee Lauder Companies anticipates reported net sales to decline 9-11% year over year. Adjusted EPS on a cc basis is expected to plunge 60-66% in the fiscal second quarter.
Wrapping Up
The Estee Lauder Companies has a strong presence in emerging markets, which insulates it from the macroeconomic headwinds in mature markets. The company has a strong online business and expects it to be a major growth engine for the upcoming years. EL is on track to expand its consumer reach in productive distribution across high-growth channels while strategically expanding brands into new countries.
Whether these upsides can help the company keep its growth story alive amid hurdles is yet to be seen.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year sales and earnings suggest growth of 57.8% and 62.1%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for Kraft Heinz’s current financial year sales and earnings suggests growth of 1% and 6.5%, respectively, from the year-ago reported numbers.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
The Estee Lauder Companies (EL) Hurt by Softness in Asia Region
The Estee Lauder Companies Inc. (EL - Free Report) appears in a tight spot due to persistent weakness in Asia travel retail. The leading skincare, makeup, fragrance and hair care product provider’s international presence keeps it exposed to risks of unfavorable currency rates.
These factors put pressure on the company’s first-quarter fiscal 2024 performance. Management is cautious about incremental external headwinds like economic hurdles in China and foreign currency fluctuations, among others.
The Zacks Rank #5 (Strong Sell) stock has slumped 24.2% in the past six months compared with the industry’s 15.9% decline. The stock has underperformed the Zacks Consumer Staples’s decline of 3.4% during this time.
Let’s delve deeper.
Image Source: Zacks Investment Research
Softness in Asia Region a Concern
The Estee Lauder Companies has been bearing the brunt of weakness in the Asia travel retail and slower-than-anticipated recovery in the prestige beauty across mainland China. During first-quarter fiscal 2024, quarterly sales in the Asia-Pacific region fell 6% year over year to $1,058 million. Total company net sales also fell 10% to 3,518 million. Organic net sales dropped 11%, mainly due to softness in the Asia travel retail business and slower-than-anticipated recovery in the overall prestige beauty in mainland China.
Volatile Currency Movements
Thanks to The Estee Lauder Companies’ solid international presence, it remains exposed to unfavorable currency fluctuations. Any adverse currency fluctuation will likely dent the company’s operating performance. For the fiscal 2024, management projects an unfavorable currency impact of 1% on net sales. Currency headwinds are likely to affect net earnings per share (EPS) by nearly 16 cents in the fiscal 2024.
Road Ahead Looks Challenging
The Estee Lauder Companies is witnessing a slower growth rate in the Asia travel retail and overall prestige beauty in mainland China, which is also evident in the presale period of the 11.11 Shopping Festival. Another factor dampening the company’s outlook is the potential risks of more business disruptions across Israel and other regions of the Middle East. EL is also exposed to the dangers of unfavorable currency headwinds.
Well, slower-than-anticipated net sales and margin recovery stemming from incremental external headwinds prompted management to lower fiscal 2024 guidance. For the fiscal 2024, management projects net sales in the range of a 2% decline and a 1% increase. The company had earlier expected net sales to increase 3-5%. Adjusted earnings per share (EPS) are expected to decline 25-33% at constant currency or cc, against growth of 4-12% projected earlier.
For the second quarter of fiscal 2024, The Estee Lauder Companies anticipates reported net sales to decline 9-11% year over year. Adjusted EPS on a cc basis is expected to plunge 60-66% in the fiscal second quarter.
Wrapping Up
The Estee Lauder Companies has a strong presence in emerging markets, which insulates it from the macroeconomic headwinds in mature markets. The company has a strong online business and expects it to be a major growth engine for the upcoming years. EL is on track to expand its consumer reach in productive distribution across high-growth channels while strategically expanding brands into new countries.
Whether these upsides can help the company keep its growth story alive amid hurdles is yet to be seen.
Solid Staple Picks
e.l.f. Beauty (ELF - Free Report) sports a Zacks Rank #1 (Strong Buy). ELF has a trailing four-quarter earnings surprise of 90.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year sales and earnings suggest growth of 57.8% and 62.1%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for Kraft Heinz’s current financial year sales and earnings suggests growth of 1% and 6.5%, respectively, from the year-ago reported numbers.