The Estee Lauder Companies Inc. EL is slated to launch second-quarter fiscal 2018 outcomes on Feb 2. We notice that this cosmetics big has delivered constructive earnings and gross sales shock for 13 and three consecutive quarters, respectively. The firm has been gaining from give attention to strategic acquisitions, sturdy foothold in the sweetness area and strong on-line and journey retail community. Let’s see if Estee Lauder can maintain its spectacular shock streak alive this time too.
Estee Lauder Companies, Inc. (The) Price and EPS Surprise
Factors at Play
Estee Lauder has been witnessing year-over yr top-line progress for greater than two years now, whereas its backside line depicted progress in the previous three quarters. The cosmetics big-wig’s splendid previous report and buyers’ confidence in its prospects is nicely mirrored by the 69.1% surge in its shares over a yr. This additionally crushed the industry ‘s rally of 38%.
Focus on Buyouts, Online & Travel Retail to Drive Q2 Results
We anticipate Estee Lauder to proceed gaining from its strong model portfolio throughout most classes, advantages from acquisitions and strong presence in rising markets. Notably, the buyouts of BECCA and Too Faced (throughout first-quarter fiscal 2017) have strengthened Estee Lauder’s quickest rising status portfolio and contributed considerably to gross sales progress in first-quarter fiscal 2018. Also, administration expects these manufacturers to contribute roughly Three proportion factors to the corporate’s general gross sales progress in the second quarter. Also, the funding in DECIEM – a fast-growing multi-brand firm is more likely to assist magnificence gross sales.
Estee Lauder additionally has a robust on-line enterprise and the corporate expects it to be a serious progress engine for the upcoming years. Thanks to technological development and the rising reputation of social media, cellular gross sales constituted about 70% of the corporate’s on-line visitors in the final quarter and stays a serious progress driver. Estee Lauder can also be rising its gross sales in China by way of T-mall, the most important digital platform run by Chinese e-commerce big, Alibaba. Estee Lauder stays targeted on widening its international on-line presence by including new websites and increasing retailer distributions.
Prospects from China Bode Well
While Estee Lauder has a strong presence in rising markets, strong prospects from China seem brilliant, as gross sales in this area soared almost 50% in the primary quarter. This was pushed by double-digit progress in all manufacturers, with MAC, Tom Ford and Lab Series companies almost doubling yr over yr. Also, administration said that its make-up enterprise doubled for the second straight quarter, whereas efficiency of its pores and skin care and luxurious perfume enterprise additionally remained favorable in the quarter. The firm’s operations in China have been gaining from rising demand from millennials. Management thus envisions continued power in luxurious merchandise in China, which retains it inspired about making incremental investments in the area. Notably, the Zacks Consensus Estimate for gross sales from Asia/Pacific area is pegged at $763 million, depicting year-over-year progress of 15.Eight%.
Skin Care & Makeup Categories Remain Major Drivers
All these elements, together with progress in journey retail have been spurring progress at Estee Lauder and are probably to maintain this development in the quarter to be reported. Among all classes, Estee Lauder’s pores and skin care and make-up classes have been performing notably nicely for almost a yr. In the final quarter, pores and skin care and make-up gross sales superior 16% and 18% yr over yr, respectively. We anticipate these classes to stay main drivers in the second quarter as nicely.
Turning to estimates for the second quarter, the Zacks Consensus Estimate for skincare and make-up gross sales is presently pegged at $1,434 million and $1,515 million, reflecting year-over-year progress of about 15% and 16%, respectively. Further, the consensus mark for perfume and hair care gross sales is $553 million and $147 million, in contrast with the year-ago interval gross sales of $497 million and $137 million, respectively.
Q2 Expectations as a Whole
Clearly, Estee Lauder is predicted to proceed with its prime and bottom-line progress development in the second quarter. Incidentally, administration forecasts internet gross sales progress of 13-15% in the quarter. On a continuing foreign money foundation, gross sales are anticipated to enhance 10-11%. Currency is predicted to positively influence second-quarter gross sales by Three-Four%.
Further, the corporate envisions adjusted earnings in the vary of $1.38-$1.41 per share for the second quarter. The earnings vary marks a rise of 13% to 15% over the prior-year earnings. On a continuing foreign money foundation, adjusted earnings are anticipated to enhance Eight-10%.
Encouragingly, the Zacks Consensus Estimate for second-quarter earnings witnessed an uptrend in the previous 30 days, and is now pegged at $1.43, which represents greater than 17% progress from the year-ago interval. Moreover, analysts polled by Zacks anticipate revenues of $Three,673 million, up 14.5% from the year-ago reported determine.
What the Zacks Model Unveils
To prime it, our confirmed mannequin exhibits that Estee Lauder is more likely to beat bottom-line estimates this quarter. For this to occur, a inventory must have each a constructive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or Three (Hold). You can uncover one of the best shares to purchase or promote earlier than they’re reported with our Earnings ESP Filter .
Well, Estee Lauder possesses the correct mixture at present, because the Zacks Rank #2 firm has Earnings ESP of +zero.23%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Stocks With Favorable Combination
Here are another corporations you could need to think about as our mannequin exhibits that these have the appropriate mixture of parts to publish an earnings beat:
Campbell Soup Company CPB has an Earnings ESP of +zero.82% and a Zacks Rank #Three.
Coty Inc. COTY has an Earnings ESP of +2.62% and carries a Zacks Rank #Three.
The Coca-Cola Company KO has an Earnings ESP of +1.45% and carries a Zacks Rank #Three.
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.