Estée Lauder (EL) Beats Estimates but Misses on Revenues

Shares of Estée Lauder (EL) have tumbled 6.78% on Monday's session after a weak forecast full-year earnings and lower-than-expected revenues.

The company reported earnings per share of $0.40, which were less than the $0.66 per share obtained in the same quarter a year ago but were higher than estimates by $0.06. On the other hand, revenue at $2.52 billion was smaller than analyst's estimates and also lower than the $2.73 billion obtained in the same time frame the year before.The explanation is based on weak demand for Clinique and Skin Care products, which are expected to improve by the end of the next year.

Some Regions Had a Bad Performance. Analyzing its revenue by segment, the Skin Care business fell 16% to $1.01 billion, and the Makeup dropped 4% to $1.02 billion.
However, the Fragrance unit rose 9% to $336.1 million, and the Hair Care climbed 4% to $139.8 million. By geography, investors can see a big drop in EMEA by 13% to $982.4 million and Asia/Pacific 7% to $454.3 million while the Americas slid 1% to $1.09 billion.

Guidance. For the first quarter of 2016 the firm expects net sales to grow in the range of 13% to 14% (on a constant currency basis) and Diluted EPS between $0.66 to $0.69 per share. For full year fiscal 2016, net sales are expected to grow between 8% and10% (on a constant currency basis), Diluted EPS varying from $3.10 to $3.17 per share while average expectations were at $3.28 per share.

Insider Opinion. Fabrizio Freda, President and Chief Executive Officer, said, "Today, our Company is more balanced, resilient, and agile and has demonstrated its ability to produce consistent and sustainable results. Together with our powerful brand portfolio and financial discipline we finished our fiscal year with a strong fourth quarter, generating 7% constant currency sales growth, after adjusting for the accelerated sales orders we reported in fiscal 2014. One of the great strengths of our Company is our ability to successfully execute our well-defined strategy. This was clearly evident in fiscal 2015 as we once again delivered strong results despite considerable macroeconomic headwinds and challenges."

Returning Value. Estee Lauder will pay a quarterly dividend of $0.24 per share common stock on September 15, 2015, to stockholders of record at the close of business on August 31, 2015.

Final Comment. The stock returned more than 8.5% on a year-to-date basis and almost the same in the past 12 months. Despite this, slower growth means operating margins will be hurt shortly.
Published on Aug 18, 2015
By Omar Venerio
Capital Markets, Derivatives and Financial Management Professor, Master in Finance and CFA candidate. I am an independent trader of stocks and options and passionate about the stock market.

Copyrighted 2016. Content published with author's permission.

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