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Things to Note Ahead of Estee Lauder's (EL) Q2 Earnings

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The Estee Lauder Companies Inc. (EL - Free Report) is slated to report second-quarter fiscal 2020 results on Feb 6, before the opening bell. In the last reported quarter, the company delivered a positive earnings surprise of 4.4%. In fact, this cosmetics behemoth boasts a splendid earnings surprise history. Estee Lauder’s earnings outperformed the Zacks Consensus Estimate by 14.3%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fiscal second-quarter earnings has moved north by 2 cents to $1.91 over the past 30 days. This suggests an increase of 9.8% from the year-ago period’s reported figure. Further, the consensus mark for revenues is pegged at $4,364 million, indicating growth of around 9% from the figure reported in the year-ago quarter.

Key Factors to Note

Estee Lauder has been benefiting from strong online business. The company has been continuously implementing new technology and digital experiences like online booking for each store appointment, omni-channel loyalty programs and high touch mobile services to boost online sales. Further, it has expanded brand presence across various third-party sites to widen market reach.

Also, Estee Lauder has been gaining from a robust travel retail network. In order to enhance travel retail sales, the company has been focused on undertaking endeavors like better customer insights, enhanced merchandising and improved digital marketing.

The Estee Lauder Companies Inc. Price, Consensus and EPS Surprise

These apart, a solid emerging market presence bodes well for Estee Lauder. In this regard, the company’s constant investments in China might have been a key catalyst, given the favorable demographic trends. The consensus mark for sales in Asia-Pacific stands at $1,243 million, suggesting an increase of 21.9% from $1,020 million reported in the year-ago period. Further, the consensus mark for sales in Europe, the Middle East & Africa is pegged at $1,977 million, indicating a rise of 11.9% from $1,767 million reported in the year-ago period.

On the last earnings call, management guided net sales increase of 7-8% in the second quarter of fiscal 2020. Further, the company projected adjusted earnings of $1.83-$1.86. At cc, the company expects a 6-7% increase in earnings, bearing the impacts of elevated spending for innovation, holiday season programs and efforts to draw traffic and boost share.

Also, the company has been grappling with foreign currency headwinds. Management expects currency fluctuations to have negatively impacted the top line by 1% in the second quarter. Also, adverse currency is likely to have hurt the bottom line by nearly 2 cents.

Moreover, Estee Lauder has been witnessing persistent softness in the brick-and-mortar retail space in the U.K. and the United States. The consensus mark for sales in the Americas stands at $1,155 million, indicating a decline of 5.2% from $1,218 million reported in the year-ago period.

What the Zacks Model Unveils

Our proven model does not predict an earnings beat for Estee Lauder this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Estee Lauder carries a Zacks Rank #3 and has an Earnings ESP of -0.41%.

Stocks with Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Campbell Soup Company (CPB - Free Report) currently has an Earnings ESP of +3.34% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hain Celestial Group, Inc. (HAIN - Free Report) presently has an Earnings ESP of +5.26% and a Zacks Rank #2.

The Kraft Heinz Company (KHC - Free Report) currently has an Earnings ESP of +1.33% and a Zacks Rank #3.

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