Why Estée Lauder (EL) Shares Are Trading Lower Today

Max Juang /
2024/05/01 12:09 pm EDT

What Happened:

Shares of beauty products company Estée Lauder (NYSE:EL) fell 11.3% in the morning session after the company reported first quarter results, with its revenue and earnings forecast for the next quarter falling below analysts' expectations. Full-year earnings guidance also missed Wall Street's estimates. 

On the other hand, Estée Lauder beat analysts' EPS expectations. Its operating margin also outperformed Wall Street's estimates. Management tried to put a positive spin on things by signaling that improvement is on the way. "With our third quarter results and fourth quarter outlook, we are confident that the second half of fiscal 2024 will prove to be an inflection point for our Company performance. We expect accelerating momentum in organic sales growth in the fourth quarter, and for operating margin in the second half of fiscal 2024 to not only be stronger than the first half but also to expand from the year-ago period.” Overall, this quarter's results were fine, but guidance is dragging the stock down.

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What is the market telling us:

Estée Lauder's shares are not very volatile than the market average and over the last year have had only 8 moves greater than 5%. Moves this big are very rare for Estée Lauder and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock gained 19.4% on the news that the company reported second-quarter results that blew past analysts' EPS expectations. Its operating margin also outperformed Wall Street's estimates. 

On the other hand, its earnings forecast for the next quarter missed analysts' expectations, and its full-year earnings guidance missed Wall Street's estimates. The company did provide some silver lining, though, projecting a "return to double-digit organic net sales growth in the second half of fiscal 2024." In addition, Estee Lauder announced a restructuring plan as part of its profit recovery efforts, which will result in a 3-5% headcount reduction. Overall, results still seemed fairly positive given that outlook for a topline recovery.

Estée Lauder is down 12% since the beginning of the year, and at $128.14 per share it is trading 48.1% below its 52-week high of $246.87 from April 2023. Investors who bought $1,000 worth of Estée Lauder's shares 5 years ago would now be looking at an investment worth $751.38.

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