Zacks Industry Outlook Highlights Estee Lauder, Coty, Inter Parfums, and Helen of Troy
For Immediate Release
Chicago, IL – February 22, 2024 – Today, Zacks Equity Research discusses The Estee Lauder Companies Inc. EL, Coty Inc. COTY, Inter Parfums, Inc. IPAR and Helen of Troy Ltd. HELE.
Industry: Cosmetics
Link: https://www.zacks.com/commentary/2229092/4-cosmetics-stocks-worth-watching-on-robust-industry-trends
Players in the Zacks Cosmetics industry are benefiting from burgeoning demand for skincare and personal care products, given consumers’ growing inclination toward self-care. Also, focus on prudent product launches is working for Cosmetic companies.
Yet, players in the space are not immune to inflationary headwinds and supply-chain bottlenecks. The focus on expanding omnichannel capabilities is working well for companies like The Estee Lauder Companies Inc., Coty Inc., Inter Parfums, Inc. and Helen of Troy Ltd.
About the Industry
The Zacks Cosmetics industry includes companies providing beauty and personal care products. Players in the space manufacture, distribute, sell and market skincare, fragrance, makeup and hair care products. Many firms sell products via sales representatives, whereas some do the same through retailers, independent and chain drug stores and pharmacies, upscale perfumeries, department stores and beauty salons.
These companies also operate through retailer websites, third-party distributors and in-flight and duty-free shops. Some of the products offered by the industry participants include moisturizers, serums, toners and cleansers under skincare; perfume sprays, candles and soaps under fragrance; lipsticks, mascaras, powders, eye shadows, foundation and nail polishes under makeup; and shampoos, conditioner and hair color products under hair care.
Trends Shaping the Future of the Cosmetics Industry
Innovation & Digitization – Major Drivers: Talking of beauty and skincare, consumers keep expecting unique product offerings incorporating the latest technologies and expert scientific formulations. Focus on resonating with consumers’ evolving preferences has kept cosmetics players busy in terms of innovation and product launches. Increased consumer awareness has also stimulated demand for organic skincare and “clean beauty” products.
Further, Cosmetics players’ foremost priority has been to broaden their market reach by boosting e-commerce capabilities. Companies in the space have made significant progress, evidenced by tools like virtual try, new digital payment solutions and digital marketing efforts. Other than this, players have been fueling brand portfolios through prudent buyouts and strategic alliances.
Strong Demand for Skincare & Makeup: Burgeoning demand for skincare and other personal care products has been an upside for several cosmetics companies. Consumers’ increased focus on self-care and maintaining healthy skincare routines bodes well for this category. Strength in the makeup category, courtesy of demand for beauty products, has been driving growth for cosmetics players. Players in the space are also witnessing strength in the fragrance and haircare category, with product newness being a solid driver. Such upsides are likely to continue supporting the top-line performance of cosmetics companies.
Inflationary Headwinds: Cosmetic companies have been battling inflationary pressure thanks to a rise in operating costs like labor, supplies and travel, among others. Several players are witnessing supply-chain bottlenecks from wide-scale shortages of materials, higher freight prices and port congestions. Rising costs of living, hiked interest rates and rising household debt are compelling consumers to cut down on discretionary purchases, thus impacting demand for products offered by cosmetic players. A highly competitive cosmetic market compels companies to indulge in heavy research and development, therefore putting pressure on margins.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Cosmetics industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #98, which places it in the top 39% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries leads to a positive aggregate earnings outlook for the constituent companies.
Before we present a few stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock-market performance and valuation picture.
Industry Vs. Broader Market
The Zacks Cosmetics industry has underperformed the Zacks S&P 500 composite and the broader Zacks Consumer Staples sector over the past year.
The industry has moved down 10.4% over this period, against the S&P 500’s increase of 25.6%. The broader sector has dropped 4.6% in the said time frame.
Industry's Current Valuation
On the basis of forward 12-month Price-to-earnings (P/E), which is commonly used for valuing consumer staples stocks, the industry is currently trading at 33.70X compared with the S&P 500’s 20.70X and the sector’s 17.12X.
In the past five years, the industry has traded as high as 43.55X, as low as 23.11X, and at the median of 31.62X.
4 Cosmetic Stocks Worth Watching
Inter Parfums: The Zacks Rank #2 (Buy) company manufactures, distributes and markets a wide range of fragrances and related products. Inter Parfums appears well-positioned in the booming fragrance market due to its legacy scents and innovative extensions. Buoyed by robust momentum in the fragrance space, along with gains from product newness, the company is set to witness another record year in 2024. Management is also on track to expand its business through new licenses or acquisitions. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for IPAR’s current fiscal year earnings per share (EPS) has moved up 0.6% to $4.78 in the past 30 days. Shares of Inter Parfums have gained 23.5% in the past three months.
The Estee Lauder Companies: This New York-based company manufactures and markets skincare, makeup, fragrance and hair care products. The Zacks Rank #3 (Hold) company has a strong presence in emerging markets, where demand appears to be growing. The Estee Lauder Companies has a strong online business, which is a major growth engine. Apart from this, management is on track to operationalize the Profit Recovery Plan for fiscal 2025 and 2026, which is aimed at rebuilding stronger and more sustainable profitability alongside supporting sales growth.
The Zacks Consensus Estimate for EL’s current fiscal year EPS moved down by 3% in the past 30 days to $2.24. EL’s shares have increased 18.3% in the past three months.
Coty: The manufacturer, marketer and distributor of beauty products carries a Zacks Rank #3 (Hold). With the ongoing premiumization trends, Coty continues to witness strength in the beauty market. The company is gaining on such favorable trends, with momentum in the core categories and an impressive innovation pipeline. Coty has been benefiting from its focus on six strategic pillars aimed at sustainable growth, including expanding makeup brands and mass fragrances and establishing a strong skincare portfolio. Also, management is committed to optimizing the overall cost structure.
The Zacks Consensus Estimate for Coty’s current fiscal year EPS has moved up 15.4% in the past 30 days to 45 cents. COTY’s stock has gained 10.2% in the past three months.
Helen of Troy: This provider of consumer products across Beauty, Housewares and Health & Home segments is focused on making solid investments in its Leadership Brands. The Zacks Rank #3 is making major investments in key areas to continue driving growth. To this end, the company is investing in consumer-centric innovation, digital marketing and media, new packaging, enhanced production and distribution capacity and direct-to-consumer channels, among others. Helen of Troy’s focus on developing a global restructuring plan, Project Pegasus, looks promising.
The Zacks Consensus Estimate for Helen of Troy’s current fiscal year EPS has remained unchanged in the past 30 days at $8.76. The stock has gained 18.9% in the past three months.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/ Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
Helen of Troy Limited (HELE) : Free Stock Analysis Report
Inter Parfums, Inc. (IPAR) : Free Stock Analysis Report
Coty (COTY) : Free Stock Analysis Report
