It appears to be the right time for investors to take a look at The Estee Lauder Companies Inc. (EL - Free Report) , which looks quite well positioned for 2019, owing to its superb fundamentals and growth endeavors. This cosmetics biggie has all it takes to catch investors’ attention. Let’s delve deeper into the company, which boasts of a stellar past record, and has also witnessed positive estimate revisions for the current and next fiscal years over the past 60 days.
What’s Attractive About Estee Lauder?
Estee Lauder has made several acquisitions to enhance its portfolio. The acquisitions of BECCA and Too Faced have strengthened the company’s fastest growing prestige portfolio. The investment in DECIEM, a fast-growing multi-brand company, is also likely to aid beauty sales. Apart from skin care, Estee Lauder has also acquired high-end fragrance and lifestyle brands. In fact, management stated that total sales from brands acquired in the past few years advanced considerably during the first quarter, and the company is focused on making further expansions by entering new markets along with introducing new products and integrating them successfully.
Estee Lauder is also set to gain from its robust travel retail network. Travel retail sales continued to accelerate in the first quarter of fiscal 2019, backed by broad-based growth across countries and brands. The company witnessed its highest increases in the Middle East, India, Turkey, Southeast Asia and Russia. Estee Lauder’s travel retail sales have been benefitting from a rise in traffic, effective launches, impressive marketing strategies and unique product range. Further, the company expects this business to gain from rising passenger traffic, favorable fundamentals and higher conversions. Well, Estee Lauder is committed toward undertaking more efforts to enhance conversions through better customer insights, enhanced merchandising and improved digital marketing.
Another factor that makes Estee Lauder a lucrative pick is its strong online business, which is expected to be a major growth engine for the upcoming years. Estee lauder, which has now expanded its footprint online to about 40 countries, is implementing new technology and digital experiences. These include online booking for each store appointment, omni-channel loyalty programs and high touch mobile services. During the first quarter of fiscal 2019, the company’s e-commerce sales rose considerably across all channels — brand.com, retail.com and third-party websites. Estee Lauder is focused on widening its global online presence by adding new sites and expanding retailer distributions.
Backed by such upsides along with a solid emerging market presence, Estee Lauder marked its 17th consecutive quarter of earnings beat, while sales kept its positive surprise trend alive for the seventh straight time when it reported first-quarter fiscal 2019 results. Also, both metrics advanced year over year. While earnings gained from robust sales and efficient cost management backed by the company’s Leading Beauty Forward initiative, revenues were fueled by strength across most geographic regions, brands (especially MAC) and product categories (with skin care standing out).
Is the Stock Well Placed for 2019?
Although Estee Lauder does face competition from cheaper alternatives and remains exposed to macroeconomic hurdles, the company’s sturdy fundamentals cannot be ignored. While the stock has gained just about 1% so far this year, it has performed much better than the industry’s slump of close to 17%. Clearly, Estee Lauder’s growth endeavors keep it well positioned for 2019, evident from its Zacks Rank #2 (Buy) and management’s outlook.
Incidentally, management expects continued growth opportunities in the global prestige beauty industry, which is now anticipated to grow 5-6% in fiscal 2019. Also, the company is on track with the implementation of the Leading Beauty Forward initiative, directed toward efficient management of costs and operations. All these growth drivers encouraged management to raise its earnings outlook for fiscal 2019, when it reported first-quarter results. The company now envisions earnings to come in a range of $4.73-$4.82 per share.
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