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 Inc. (EL - Free Report) reported second-quarter fiscal 2024 results, with the top and the bottom line declining year over year. Quarterly net sales and earnings surpassed the Zacks Consensus Estimate.
Quarterly results were hurt by softness in the Asia travel retail and the prestige beauty across mainland China. Also, disruptions in Israel and other parts of the Middle East remained a concern. Taking into account global macroeconomic volatility, management narrowed its fiscal 2024 net sales range while lowering its adjusted earnings per share (EPS) outlook for fiscal 2024.
Quarter in Detail
The company posted adjusted earnings of 88 cents per share, surpassing the Zacks Consensus Estimate of 55 cents. However, the bottom line slumped 43% from $1.54 per share reported in the year-ago period. Adjusted EPS came in at 89 cents at constant currency.
Net sales of $4,280 million surpassed the Zacks Consensus Estimate of $4,190.9 million. However, the metric fell 7% from $4,621 million reported in the year-ago quarter.
Organic net sales fell 8%, mainly due to softness in the Asia travel retail business and the overall prestige beauty in mainland China. The downside can also be attributed to business disruptions across Israel and other parts of the Middle East. These were somewhat offset by organic net sales growth in several markets across Asia/Pacific and Europe, the Middle East & Africa and Latin America.
The gross profit came in at $3,125 million, down 8% year over year. Gross margin came in at 73%, down from 73.6% reported in the year-ago quarter.
The operating income came in at $574 million, up 3% from $556 million reported in the year-ago period. Operating income margin expanded to 13.4% from 12% reported in the year-ago quarter.
Product-Based Segment Results
Skin Care’s sales were down 10% year over year to $2,173 million. Makeup revenues fell 8% year over year to $1,167 million. In the Fragrance category, revenues of $737 million were in line with the year-ago quarter’s figure. Hair Care sales totaled $173 million, down 5% year over year.
Regional Results
Sales in the Americas inched up 1% year over year at $1,242 million. Revenues in the EMEA region declined 13% to $1,589 million. In the Asia-Pacific region, sales fell 8% to $1,449 million.
Other Updates
The Zacks Rank #3 (Hold) exited the quarter with cash and cash equivalents of $3,939 million, long-term debt of $6,640 million and total equity of $5,712 million.
The net cash flow provided by operating activities for six months ended Dec 31, 2023, was $937 million. Capital expenditures during this time amounted to $527 million. The company returned $474 million to shareholders through dividend payouts.
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 Mar 15, 2023 to shareholders of record as of Feb 29.
Management announced the expansion of the Profit Recovery Plan for fiscal 2025 and 2026 to include a restructuring program. The program is aimed at better gross margin and reducing cost base and overhead expenses while increasing investments in consumer-facing activities. Per the plan, the company projects a 3-5% net reduction in its job positions.
Fiscal 2024 Outlook
For fiscal 2024, management is tightening its organic sales range on macroeconomic volatility in several areas. The company is lowering and tightening its adjusted EPS range to reflect the projected increase in the effective tax rate, somewhat offset by the favorable impact of foreign currency translations. The company is reaffirming the adjusted operating margin for fiscal 2024.
The company expects to return to double-digit organic net sales growth during the back half of fiscal 2024. It also anticipates witnessing a pressured gross margin in the fiscal third quarter and fiscal 2024. Operating margin in the second half of fiscal 2024 is likely to improve from the first half of the year.
For fiscal 2024, management now projects net sales and organic net sales in the range of a 1% decline and a 1% increase. The company had earlier expected a net sales decline of 2% to 1% increase. Organic net sales were earlier anticipated in the range of 1% decline and 2% growth in fiscal 2024.
Adjusted EPS is now expected in the band of $2.08-$2.23, suggesting growth from $3.46 reported in fiscal 2023. Adjusted EPS was earlier expected in the band of $2.17-$2.42, suggesting growth from $3.46 reported in fiscal 2023. Adjusted EPS is now expected to decrease 34-38% at cc, compared with a decline of 25-33% projected earlier. The company’s guidance assumes an annual effective tax rate of nearly 35%.
Q3 Guidance
For the third quarter of fiscal 2024, The Estee Lauder Companies anticipates reported net sales to grow 3%-5% year over year. Organic net sales are likely to increase 4-6% in the quarter. Reported EPS are projected to be between 35 and 46 cents. Adjusted EPS, on a cc basis, are expected to be in the range of an 18% decline to 3% growth in the fiscal third quarter.
The company’s stock has gained 19% in the past three months compared with the industry’s growth of 22.7%.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year sales and earnings suggest growth of 60.4% and 66.3%, respectively, from the year-ago reported numbers.
Inter Parfums (IPAR - Free Report) , which manufactures, markets and distributes a range of fragrances and fragrance-related products, carries a Zacks Rank #2. IPAR has a trailing four-quarter earnings surprise of 45.9% on average.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggest growth of 20.9% and 20.2%, respectively, from the year-ago reported numbers.
Flowers Food (FLO - Free Report) produces and markets packaged bakery food products. FLO currently has a Zacks Rank #2. Flowers Food has a trailing four-quarter earnings surprise of 6.8%, on average.
The Zacks Consensus Estimate for FLO’s current financial-year sales suggests growth of 5.9% from the year-ago reported figure.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Estee Lauder (EL) Cuts FY24 Profit View Despite Q2 Earnings Beat
The Estee Lauder Companies Inc. (EL - Free Report) reported second-quarter fiscal 2024 results, with the top and the bottom line declining year over year. Quarterly net sales and earnings surpassed the Zacks Consensus Estimate.
Quarterly results were hurt by softness in the Asia travel retail and the prestige beauty across mainland China. Also, disruptions in Israel and other parts of the Middle East remained a concern. Taking into account global macroeconomic volatility, management narrowed its fiscal 2024 net sales range while lowering its adjusted earnings per share (EPS) outlook for fiscal 2024.
Quarter in Detail
The company posted adjusted earnings of 88 cents per share, surpassing the Zacks Consensus Estimate of 55 cents. However, the bottom line slumped 43% from $1.54 per share reported in the year-ago period. Adjusted EPS came in at 89 cents at constant currency.
Net sales of $4,280 million surpassed the Zacks Consensus Estimate of $4,190.9 million. However, the metric fell 7% from $4,621 million reported in the year-ago quarter.
Organic net sales fell 8%, mainly due to softness in the Asia travel retail business and the overall prestige beauty in mainland China. The downside can also be attributed to business disruptions across Israel and other parts of the Middle East. These were somewhat offset by organic net sales growth in several markets across Asia/Pacific and Europe, the Middle East & Africa and Latin America.
The gross profit came in at $3,125 million, down 8% year over year. Gross margin came in at 73%, down from 73.6% reported in the year-ago quarter.
The operating income came in at $574 million, up 3% from $556 million reported in the year-ago period. Operating income margin expanded to 13.4% from 12% reported in the year-ago quarter.
Product-Based Segment Results
Skin Care’s sales were down 10% year over year to $2,173 million. Makeup revenues fell 8% year over year to $1,167 million. In the Fragrance category, revenues of $737 million were in line with the year-ago quarter’s figure. Hair Care sales totaled $173 million, down 5% year over year.
Regional Results
Sales in the Americas inched up 1% year over year at $1,242 million. Revenues in the EMEA region declined 13% to $1,589 million. In the Asia-Pacific region, sales fell 8% to $1,449 million.
Other Updates
The Zacks Rank #3 (Hold) exited the quarter with cash and cash equivalents of $3,939 million, long-term debt of $6,640 million and total equity of $5,712 million.
The net cash flow provided by operating activities for six months ended Dec 31, 2023, was $937 million. Capital expenditures during this time amounted to $527 million. The company returned $474 million to shareholders through dividend payouts.
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 Mar 15, 2023 to shareholders of record as of Feb 29.
Management announced the expansion of the Profit Recovery Plan for fiscal 2025 and 2026 to include a restructuring program. The program is aimed at better gross margin and reducing cost base and overhead expenses while increasing investments in consumer-facing activities. Per the plan, the company projects a 3-5% net reduction in its job positions.
Fiscal 2024 Outlook
For fiscal 2024, management is tightening its organic sales range on macroeconomic volatility in several areas. The company is lowering and tightening its adjusted EPS range to reflect the projected increase in the effective tax rate, somewhat offset by the favorable impact of foreign currency translations. The company is reaffirming the adjusted operating margin for fiscal 2024.
The company expects to return to double-digit organic net sales growth during the back half of fiscal 2024. It also anticipates witnessing a pressured gross margin in the fiscal third quarter and fiscal 2024. Operating margin in the second half of fiscal 2024 is likely to improve from the first half of the year.
For fiscal 2024, management now projects net sales and organic net sales in the range of a 1% decline and a 1% increase. The company had earlier expected a net sales decline of 2% to 1% increase. Organic net sales were earlier anticipated in the range of 1% decline and 2% growth in fiscal 2024.
Adjusted EPS is now expected in the band of $2.08-$2.23, suggesting growth from $3.46 reported in fiscal 2023. Adjusted EPS was earlier expected in the band of $2.17-$2.42, suggesting growth from $3.46 reported in fiscal 2023. Adjusted EPS is now expected to decrease 34-38% at cc, compared with a decline of 25-33% projected earlier. The company’s guidance assumes an annual effective tax rate of nearly 35%.
Q3 Guidance
For the third quarter of fiscal 2024, The Estee Lauder Companies anticipates reported net sales to grow 3%-5% year over year. Organic net sales are likely to increase 4-6% in the quarter. Reported EPS are projected to be between 35 and 46 cents. Adjusted EPS, on a cc basis, are expected to be in the range of an 18% decline to 3% growth in the fiscal third quarter.
The company’s stock has gained 19% in the past three months compared with the industry’s growth of 22.7%.
3 Solid Picks
e.l.f. Beauty (ELF - Free Report) carries a Zacks Rank #2 (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 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year sales and earnings suggest growth of 60.4% and 66.3%, respectively, from the year-ago reported numbers.
Inter Parfums (IPAR - Free Report) , which manufactures, markets and distributes a range of fragrances and fragrance-related products, carries a Zacks Rank #2. IPAR has a trailing four-quarter earnings surprise of 45.9% on average.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggest growth of 20.9% and 20.2%, respectively, from the year-ago reported numbers.
Flowers Food (FLO - Free Report) produces and markets packaged bakery food products. FLO currently has a Zacks Rank #2. Flowers Food has a trailing four-quarter earnings surprise of 6.8%, on average.
The Zacks Consensus Estimate for FLO’s current financial-year sales suggests growth of 5.9% from the year-ago reported figure.