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Estee Lauder Hits 52-Week High: What's Behind the Rally?

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Shares of The Estee Lauder Companies Inc. (EL - Free Report) touched a 52-week high of $159.07, before closing the session a tad lower at $158.98 on Feb 22. Notably, the company is gaining from a solid focus on buyouts, travel retail network, effective launches and strong online sales.

Backed by all these factors, Estee Lauder delivered a sturdy second-quarter fiscal 2019 performance, wherein both the top and bottom line improved year over year and also surpassed the respective estimates. This propelled management to raise its sales and earnings view for fiscal 2019. Markedly, the stock has gained approximately 4.6% since the announcement of its quarterly results. (Read: Estee Lauder Ups View on Robust Q2 Earnings)

In the past three months, shares of this New York-based company have rallied 12.8%, outperforming the industry’s 12.2% growth.



All said, let’s take a closer look at the aspects driving this Zacks Rank #1 (Strong Buy) stock’s performance. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Narrating Estee Lauder’s Growth Story

Estee Lauder has been intensely focusing on enhancing its travel retail business, which is a major sales driver for the company. In the second quarter of fiscal 2019, travel retail sales remained sturdy with 13 brands depicting solid growth. Rise in traffic, effective launches, impressive marketing strategies and unique product range have been providing a boost to travel retail sales. Further, the company expects the travel retail business to benefit from rising passenger traffic, favorable fundamentals and higher conversions. Estee Lauder is committed toward undertaking more efforts to enhance conversions through strategic initiatives.

These apart, the company has made several strategic acquisitions to enhance its portfolio. In this regard, the acquisitions of BECCA and Too Faced (during first-quarter fiscal 2017) are noteworthy. These transactions have strengthened Estee Lauder’s fastest growing prestige portfolio. In the fiscal second quarter, sales of BECCA witnessed solid increase courtesy of the holiday season. The investment in DECIEM, a fast-growing multi-brand company, is also likely to aid beauty sales. Earlier, Estee Lauder had acquired the sophisticated Paris-based brand — By Kilian, and the key prestige skin care brands — RODIN olio lusso and GLAMGLOW. Such acquisitions not only aided the company to expand its portfolio but also helped it attain the respective loyal customer base.

Estee Lauder’s strong online business is an added positive. In fact, the company expects it to act as a major growth driver in the upcoming years.

Meanwhile, the company is implementing new technology and digital experiences including online booking for each store appointment, omni-channel loyalty programs and high-touch mobile services. These initiatives coupled with Estee Lauder’s digital-first mindset have been providing a boost to its online sales, in turn aiding top-line growth.

During the second quarter of fiscal 2019, the company’s e-commerce sales rose in double digits across all channels — brand.com, retail.com and third-party websites. By adding new sites and expanding retailer distributions, Estee Lauder continues to focus on widening its global online presence.

Thanks to these growth drivers, management now expects net sales growth of 5-6%, adjusted net sales growth of 8-9% and adjusted earnings per share of $4.92-$5.00 for fiscal 2019. We believe that such efforts will continue driving the company’s performance.

Other Key Picks

Nu Skin Enterprises, Inc. (NUS - Free Report) has a long-term earnings growth rate of 10.9% and a Zacks Rank #2 (Buy).

Lamb Weston Holdings, Inc. (LW - Free Report) delivered average positive earnings surprise of 10.1% in the trailing four quarters. It has a long-term earnings growth rate of 12% and a Zacks Rank #2.

Nomad Foods Limited (NOMD - Free Report) delivered average positive earnings surprise of 11.4% in the trailing four quarters. It has a long-term earnings growth rate of 11% and a Zacks Rank #2.

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