Estee Lauder Faces Challenges Amid Falling Sales and EPS Declines

The report highlights significant challenges for Estee Lauder, including plunging sales, negative analyst revisions for EPS, and a bearish outlook due to external market factors. Investors are advised to be cautious.

Date: 14-09-2024

AI Rating: 4

Earnings Per Share (EPS): The report indicates that analysts have downgraded the Zacks Consensus Estimate for the current and next fiscal year EPS. EPS estimates were reduced by 2.9% to $2.97 and 4.3% to $4.03 for the respective periods. This downward adjustment is indicative of negative sentiment among analysts, suggesting challenges in achieving profitability.

Revenue Growth: For fiscal year 2025, the company anticipates a 3-5% year-over-year decline in both reported and organic net sales, reflecting tough market conditions, particularly in Asia. The report notes that sales in the Asia-Pacific region fell 7% to $1,205 million in the fiscal fourth quarter, driven by weak consumer sentiment and a downturn in retail sales.

Profit Margins: Adjusted operating margins contracted by 120 basis points to 10.2% in fiscal 2024, highlighting challenges in sustaining profitability. The outlook for fiscal 2025 suggests a slower recovery in margins, raising concerns about financial performance.

Impact of Market Conditions: The report emphasizes that high inflation, rising interest rates, and currency fluctuations are putting pressure on Estee Lauder's stock price. Compounding these issues are the company’s struggles in key markets like mainland China and Asia travel retail, alongside negative consumer behavior shifts.

Valuation and Analyst Sentiment: Despite the stock price decline, Estee Lauder's valuation remains at a premium compared to industry peers, which investors view skeptically given current market challenges. The report concludes by stating that investors should exercise caution, given that the stock is currently rated a “Strong Sell” by analysts.

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