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Estee Lauder Hits 52-Week High: What's Driving the Stock?

Zacks Equity Research

The Estee Lauder Companies Inc. EL hit a 52-week high of $192.97, before closing the session a tad lower at $190.83 on Jul 19. Shares of this Zacks Rank #2 (Buy) company have increased approximately 11.5% in the past three months compared with the industry’s growth of 9.7%.

This solid run on the bourses can be attributed to the company’s robust earnings trend. Notably, with third-quarter fiscal 2019 results, Estee Lauder marked its 19th consecutive quarter of earnings beat and ninth straight time of sales surprise. Well, this renowned beauty products company has been performing well, courtesy of its solid portfolio expansion endeavors, advancements in the online realm and focus on expanding presence in emerging markets. Let’s take a closer look. 

Factors Adding Gleam

Estee Lauder is focused on widening global online presence by adding new sites and expanding retailer distributions. To this end, the company launched Tom Ford on Tmall in China, which is likely to draw millennials. Further, Estee Lauder is implementing new technology and digital experiences like online booking for each store appointment, omni-channel loyalty programs and improved mobile services. These initiatives along with the digital-first mind set have been boosting the company’s online sales, and thereby the overall top line.

Moreover, the company has been focusing on enhancing the travel retail business, which is a major sales driver. Travel retail sales were sturdy in the third quarter of fiscal 2019, with the top five brands delivering double-digit net sales growth. Skin care and makeup along with major strength in the two largest geographic regions fueled growth in the travel retail segment in particular. Estee Lauder’s travel retail sales have been benefiting from rise in traffic, effective launches, impressive marketing strategies and a unique product range. Further, the company expects this business to gain from rising passenger traffic, favorable fundamentals and higher conversions. 

Additionally, Estee Lauder capitalizes on its strong presence in emerging markets like China, India, Turkey, Russia and Brazil. In the third quarter of fiscal 2019, the company witnessed growth in most emerging markets and created solid customer base, particularly in India and Russia. This was backed by customer-oriented products and efficient social media operations. 

China has been a major area of focus for Estee Lauder, with sales in the region increasing double digits during the third quarter. The upside was backed by sustained growth in prestige beauty. In fact, almost all brands and distribution networks saw robust double-digit growth in China. Management, as part of its long-term emerging market strategy, has been making constant investments in China for the past 20 years and plans to continue growing market share in the region. China’s long-term demographic and economic trends have been encouraging for Estee Lauder. 

Wrapping it up, we believe the company’s strong growth endeavors will help it reach greater highs in the days ahead. 

Other Key Picks

Avon Products AVP has a long-term earnings growth rate of 7.5% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Louis Vuitton LVMUY has a long-term earnings growth rate of 8% and a Zacks Rank #2.

Shiseido SSDOY has a long-term earnings growth rate of 20% and a Zacks Rank #2.

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