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Factors Shaping the Fate of Estee Lauder's (EL) Q1 Earnings

Zacks Equity Research

The Estee Lauder Companies Inc. EL is scheduled to release first-quarter fiscal 2020 results on Oct 31. In the last reported quarter, the company delivered a positive earnings surprise of 20.8%. In fact, this cosmetics behemoth boasts a splendid earnings surprise history. In the trailing four quarters, Estee Lauder’s earnings have outperformed the Zacks Consensus Estimate by average of 17.1%.

Let’s see what’s in store for the company this time around.

The Estee Lauder Companies Inc. Price and EPS Surprise

The Estee Lauder Companies Inc. Price and EPS Surprise

The Estee Lauder Companies Inc. price-eps-surprise | The Estee Lauder Companies Inc. Quote

What to Expect?

The Zacks Consensus Estimate for first-quarter earnings has been stable over the past 30 days at $1.60, which suggests an increase of 13.5% from the year-ago period’s reported figure. The consensus mark for revenues is $3,837 million, indicating growth of 9.2% from the year-ago reported figure.

Factors at Play

Rising demand for skincare products is expected to have significantly driven Estee Lauder’s first-quarter revenues. To this end, the company’s focus on innovation along with prudent marketing and advertising strategies are expected to have continued yielding positive results. The Zacks Consensus Estimate for first-quarter skincare sales is pegged at $1,694 million, suggesting an increase of close to 14% from the figure reported in the year-ago period.

Also, results are likely to reflect benefits from the Leading Beauty Forward savings initiative, strong online sales and a robust travel retail network. Rising passenger traffic and higher conversions are likely to have driven Estee Lauder’s first-quarter travel retail business revenues.

Apart from this, a solid emerging market presence most likely worked in Estee Lauder’s favor during the to-be-reported quarter. In this regard, the company’s constant investments in China might have been a key catalyst, given the favorable demographic trends. The consensus mark for sales in Asia-Pacific stands at $995 million, suggesting an increase of 16.4% from $855 million reported in the year-ago period.

In its last earnings call, management guided net sales growth of 9-10% for the first quarter. Further, adjusted earnings are projected in a range of $1.56-$1.59, indicating an improvement of 11-13% from the prior-year quarter’s reported figure.

However, potential tariff impacts, foreign currency headwinds and soft brick-and-mortar traffic in the company’s U.S. stores are headwinds. The consensus mark for sales in the Americas stands at $1,232 million compared with $1,236 million in the year-ago period.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Estee Lauder this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Estee Lauder carries a Zacks Rank #3, it has an Earnings ESP of -0.11%.

Stocks With Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Church & Dwight CHD has an Earnings ESP of +0.93% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Campbell Soup CPB has an Earnings ESP of +1.41% and a Zacks Rank #3.

Newell Brands NWL has an Earnings ESP of +6.73% and a Zacks Rank #3.

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