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Will Travel Retail Boost Estee Lauder (EL) in Q4 Earnings?

Zacks Equity Research

The Estee Lauder Companies Inc. EL is slated to release fourth-quarter fiscal 2019 results on Aug 19. The cosmetics behemoth has a sturdy earnings surprise record, surpassing the Zacks Consensus Estimate at an average of 14.2% in the trailing four quarters.

Let’s see how things are placed ahead of the upcoming quarterly release.

Robust Brands & Sales Channels are Upsides

Estee Lauder boasts solid demand for its premium products. Well, the company’s strong footing in the growing global prestige beauty industry is expected to aid performance in the fourth quarter. Moreover, it undertakes innovations and acquisitions to boost brand capabilities. Notably, the buyouts of BECCA and Too Faced have strengthened the company’s fastest growing prestige portfolio, which have driven the top line. Also, investment in DECIEM is a tailwind. Well, Estee Lauder’s focus on expanding these brands internationally is likely to expand customer base and drive performance in the to-be-reported quarter.

Speaking of sales channels, a strong travel retail network has been adding allure to this renowned beauty company. In the upcoming quarter, the travel retail business is expected to keep gaining from rising passenger traffic, wide product range, marketing strategies and higher conversions. Sales in this channel is also expected to benefit from efforts like augmenting customer insights, merchandising and digital marketing.

Additionally, Estee Lauder’s strong online business, especially sales through mobile applications, is expected to be a major growth driver in the to-be-reported quarter. The company is focusing on widening global online presence by adding sites and expanding retailer distributions. The company is also expected to benefit from wide-spread reach in emerging markets, such as China, India, Turkey, Russia and Brazil. These positives are likely to reflect on the company’s upcoming results. Apart from these, Estee Lauder is poised to benefit from the Leading Beauty Forward initiative, directed toward efficient management of costs and operations.

The Estee Lauder Companies Inc. Price, Consensus and EPS Surprise

 

The Estee Lauder Companies Inc. Price, Consensus and EPS Surprise

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

 

Headwinds in the Path

Softness in the brick-and-mortar retail space in the United States and the U.K. (especially for makeup products) is a concern for the company. This is likely to weigh on performance in the fourth quarter. Also, the impact of any adverse currency fluctuation on quarterly results cannot be ignored. In fact, management had earlier anticipated negative currency impacts of almost 22 cents on the bottom line in the fourth quarter.

How are Estimates looking?

The Zacks Consensus Estimate for earnings has moved up 2 cents in the past 30 days to 52 cents per share. However, the projected figure indicates a decline of 14.8% from the year-ago quarter’s figure.

Nevertheless, the consensus mark for revenues is pegged at $3,513 million, which suggests a rise of nearly 6.6% from the figure reported in the year-ago quarter.

What the Zacks Model Unveils

Our proven model shows that Estee Lauder is likely to beat bottom-line estimates this quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Estee Lauder’s Zacks Rank #2 combined with an Earnings ESP of +2.46% makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Poised to Beat Earnings Estimates

Here are other companies you may want to consider as our model shows that they also have the right combination of elements to beat estimates.

McCormick & Company MKC has an Earnings ESP of +0.25% and a Zacks Rank #2.

Kimberly-Clark KMB has an Earnings ESP of +0.43% and a Zacks Rank #2.

Conagra Brands CAG has an Earnings ESP of +0.42% and a Zacks Rank #3.

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