Estee Lauder (EL) is benefiting from strength in China and the Asia Pacific and its travel retail and skin care segments, even as North America struggles with the US expected to be a “soft point” in its fiscal fourth-quarter print next week, according to RBC Capital Markets.
The beauty brand’s China business showed continued acceleration in nearly every category in the last quarter, analyst Nik Modi said in a note. Estee Lauder is poised to grow sales in a high-single-digit and earnings per share and free cash flow at double-digit rates over the next decade, he said.
“The company is especially well positioned to benefit from both a rise in Chinese consumer spending as well as channel shift to e-commerce globally,” Modi said.
While Estee Lauder’s management has highlighted a potential slowdown in the Asian nation as a risk, RBC’s read-through is suggesting “continued momentum through the quarter,” Modi said. But he noted that unrest in Hong Kong which started after the quarter-end could have an impact on the current quarter.
Estee Lauder is poised to release its fiscal fourth-quarter results on Monday. The consensus on Capital IQ is for normalized earnings of $0.54 a share and revenue of $3.53 billion. That would be a mixed result year-on-year as the company in the three months ended June 2018 reported net sales of $3.3 billion and adjusted earnings of $0.61 a share.
“We expect the US to be a soft point for Estee, with ongoing weakness in MAC and a difficult retail environment,” RBC said. Modi noted that Macy’s (M) “had a difficult quarter” and called out a decline in international tourism, while L’Oreal’s makeup makeup segment was “holding the group back.”
Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with MarketBeat.com's FREE daily email newsletter.