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Why Is Estee Lauder (EL) Up 2.9% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Estee Lauder Companies, Inc. (EL - Free Report) . Shares have added about 2.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Estee Lauder Beats Q3 Earnings and Revenues
Estee Lauder continues to impress investors with better-than-expected earnings for the eleventh consecutive quarter, when the company reported third-quarter fiscal 2017 results. The company posted adjusted earnings per share of $0.91 per share, beating the Zacks Consensus Estimate of $0.73 and also surged 24.7% year over year. Excluding currency impact, adjusted earnings improved 28% year over year to $0.93 per share.
Revenues and Margins
Estee Lauder’s net sales of $2,857 million surpassed the Zacks Consensus Estimate of $2,808 million. Moreover, sales grew 8% from the prior-year quarter, driven by acquisitions of BECCA and Too Faced, which contributed to nearly half of the reported sales growth. Strong product portfolio driven by mid-sized and luxury brands, and online and specialty-multi retail channels also drove the sales higher. On a constant currency basis, net sales increased 9% year over year.
Adjusted gross profit increased 5.3% to $2,269 million. Adjusted gross margin shrank 60 basis points (bps) to 79.4% as improved revenues were offset by higher cost of sales. Adjusted operating margin expanded 210 bps to 17.1%.
Segment Results
Skin Care reported sales growth of 3% year over year to $1,105 million driven by double-digit increase from La Mer. Makeup revenues were up 9% to $1,271 million while Fragrance reported revenues growth of 22% to $336 million. Meanwhile, Hair Care sales declined 2% to $126 million. Other category reported flat sales growth in the quarter.
By Geography
Americas: Sales in the Americas increased 5% year over year to $1,171 million driven by recent buyouts of Too Faced and BECCA. Most of the company’s brands generated sales growth driven by double-digit increase from Jo Malone, Tom Ford, La Mer and Smashbo. Sales in the company’s online and specialty-multi channels grew strong double digits. However, decline in retail traffic in the U.S. mid-tier department stores negatively impacted growth. Further, lower tourism adversely affected sales in certain U.S. MAC stores.
Europe, the Middle East & Africa: Sales improved 10% year over year to $1,126 million, backed by growth in Russia, Israel, South Africa, the Balkans and India. In travel retail, net sales grew on account of new products launches, increase in global airline passenger traffic and expanded distribution.
Asia/Pacific: Sales in the region climbed 7% to $560 million on the back of double-digit growth in China. The company also witnessed strong growth in Taiwan.
Other Financial Details
Estee Lauder ended the quarter with cash and cash equivalents of $1,139 million, in comparison with $556 million reported in the year-ago-quarter. Long-term debt increased 110.9% year over year to $1,601 million. For nine months ended Mar 31, 2017, net cash provided by operating activities was $1,252 million.
Fiscal 2017 Guidance
Estée Lauder expects continued growth opportunities in the global prestige beauty industry, which is anticipated to grow 4–5% during the year. However, currency volatility and economic challenges, terrorism and social and political issues are affecting consumer behavior in few countries. The company’s annual growth has consistently outpaced global prestige beauty. Despite these global issues, it is expected to continue to grow at least one percentage point ahead of the industry for the fiscal year.
For fiscal 2017, Estée Lauder maintained net sales growth projection at 4–5%. Foreign currency is expected to negatively impact sales by 2%. On a constant currency basis, net sales are expected to grow in the range of 6–7%.
The company has raised earnings guidance for fiscal 2017. The company now expects adjusted earnings in the range of $3.32–$3.37 per share, compared with $3.29–$3.33 per share estimated earlier for fiscal 2017. On a constant currency basis, adjusted earnings are expected to grow 8–9%, narrower than the earlier guidance of 8–9%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower and one revision higher for the current quarter.
VGM Scores
At this time, the stock has an average Growth Score of 'C', though it is lagging a loton the momentum front with a 'F'. The stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Why Is Estee Lauder (EL) Up 2.9% Since the Last Earnings Report?
It has been about a month since the last earnings report for Estee Lauder Companies, Inc. (EL - Free Report) . Shares have added about 2.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Estee Lauder Beats Q3 Earnings and Revenues
Estee Lauder continues to impress investors with better-than-expected earnings for the eleventh consecutive quarter, when the company reported third-quarter fiscal 2017 results. The company posted adjusted earnings per share of $0.91 per share, beating the Zacks Consensus Estimate of $0.73 and also surged 24.7% year over year. Excluding currency impact, adjusted earnings improved 28% year over year to $0.93 per share.
Revenues and Margins
Estee Lauder’s net sales of $2,857 million surpassed the Zacks Consensus Estimate of $2,808 million. Moreover, sales grew 8% from the prior-year quarter, driven by acquisitions of BECCA and Too Faced, which contributed to nearly half of the reported sales growth. Strong product portfolio driven by mid-sized and luxury brands, and online and specialty-multi retail channels also drove the sales higher. On a constant currency basis, net sales increased 9% year over year.
Adjusted gross profit increased 5.3% to $2,269 million. Adjusted gross margin shrank 60 basis points (bps) to 79.4% as improved revenues were offset by higher cost of sales. Adjusted operating margin expanded 210 bps to 17.1%.
Segment Results
Skin Care reported sales growth of 3% year over year to $1,105 million driven by double-digit increase from La Mer. Makeup revenues were up 9% to $1,271 million while Fragrance reported revenues growth of 22% to $336 million. Meanwhile, Hair Care sales declined 2% to $126 million. Other category reported flat sales growth in the quarter.
By Geography
Americas: Sales in the Americas increased 5% year over year to $1,171 million driven by recent buyouts of Too Faced and BECCA. Most of the company’s brands generated sales growth driven by double-digit increase from Jo Malone, Tom Ford, La Mer and Smashbo. Sales in the company’s online and specialty-multi channels grew strong double digits. However, decline in retail traffic in the U.S. mid-tier department stores negatively impacted growth. Further, lower tourism adversely affected sales in certain U.S. MAC stores.
Europe, the Middle East & Africa: Sales improved 10% year over year to $1,126 million, backed by growth in Russia, Israel, South Africa, the Balkans and India. In travel retail, net sales grew on account of new products launches, increase in global airline passenger traffic and expanded distribution.
Asia/Pacific: Sales in the region climbed 7% to $560 million on the back of double-digit growth in China. The company also witnessed strong growth in Taiwan.
Other Financial Details
Estee Lauder ended the quarter with cash and cash equivalents of $1,139 million, in comparison with $556 million reported in the year-ago-quarter. Long-term debt increased 110.9% year over year to $1,601 million. For nine months ended Mar 31, 2017, net cash provided by operating activities was $1,252 million.
Fiscal 2017 Guidance
Estée Lauder expects continued growth opportunities in the global prestige beauty industry, which is anticipated to grow 4–5% during the year. However, currency volatility and economic challenges, terrorism and social and political issues are affecting consumer behavior in few countries. The company’s annual growth has consistently outpaced global prestige beauty. Despite these global issues, it is expected to continue to grow at least one percentage point ahead of the industry for the fiscal year.
For fiscal 2017, Estée Lauder maintained net sales growth projection at 4–5%. Foreign currency is expected to negatively impact sales by 2%. On a constant currency basis, net sales are expected to grow in the range of 6–7%.
The company has raised earnings guidance for fiscal 2017. The company now expects adjusted earnings in the range of $3.32–$3.37 per share, compared with $3.29–$3.33 per share estimated earlier for fiscal 2017. On a constant currency basis, adjusted earnings are expected to grow 8–9%, narrower than the earlier guidance of 8–9%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower and one revision higher for the current quarter.
VGM Scores
At this time, the stock has an average Growth Score of 'C', though it is lagging a loton the momentum front with a 'F'. The stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.