Estee Lauder Stock (NYSE: EL) is down 17% in a month, underperforming the broader markets, with the S&P500 up only 0.5%. That can be attributed to its downbeat Q3 results it reported last week. However, as discussed below, EL stock has room for growth after its recent decline.
Estee Lauder’s Revenue fell 12% to $3.8 billion in fiscal Q3’23 (fiscal ending June). The decline was primarily due to a 20% drop in skin care sales amid a slow recovery in Asia travel. Its makeup sales were down 2%, while fragrance and hair care grew 1%. The company’s gross margin fell 750 bps to 69.1%, and its operating income margin stood at 7.9%, marking a year-over-year decline of 950 bps. This can be attributed to the higher manufacturing cost and other charges. Our Estee Lauder Operating Income Comparison There are more details in the dashboard. Lower sales and a sharp decline in margins meant that its earnings fell 72% to $0.44 per share on a reported basis. Adjusted earnings per share were $0.47, reflecting a 74% year-over-year decline below the $0.51 consensus estimate.
Estee Lauder not only posted disappointing third-quarter results, but it also lowered its full-year outlook. It now expects its sales to fall between 12% and 10% for full-fiscal 2023, compared to prior guidance of a 5% to 7% decline. It expects its earnings to fall between 50% and 51% in fiscal 2022 to the $7.24 figure. This didn’t sit well with investors, as evidenced by the stock price correction.
Given the stock price, we estimate Estee Lauder’s evaluation $236 per share, up about 17% from the current market price of $201. At its current levels, EL stock is trading at 35x its forward expected earnings of $5.79 per share in fiscal 2024 and on an adjusted basis. This compares with its last five-year average of 47x, which means it has room for growth. We assign a P/E multiple slightly below its historical average, given the recessionary outlook and slower than expected demand for travel to Asia.
While EL stock looks like it could see higher levels, it’s helpful to look at how Estee Lauder Companions Hire on metrics that matter. You’ll find other valuable comparisons for companies from different industries here peer comparison,
Furthermore, the COVID-19 crisis has created several pricing anomalies that could provide lucrative trading opportunities. For example, you’d be surprised how counter-intuitive stock valuations are. Syntus vs Merck,
With inflation rising and the Fed raising interest rates, among other factors, EL stock has fallen 19% so far this year. Can it fall further? Compare declines in previous market crashes to see how far Estee Lauder stock can go. Here is the performance summary of all the stocks in the past market crashes.
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| Return | May 2023 mtd [1] |
2023 YTD [1] |
2017-23 Total [2] |
| el return | -18% | -19% | 163% |
| S&P 500 Return | -1% | 8% | 85% |
| Trefis Multi-Strategy Portfolio | -1% | 8% | 239% |
[1] Month-to-Date and Year-to-Date as of 5/11/2023
[2] Cumulative Total Return since the end of 2016
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