Estée Lauder performance gets thumbs up from analysts

Analysts at Raymond James issued a research note yesterday upgrading its rating for the Estée Lauder Companies to ‘outperform’, in turn triggering further positive analysis that has led do an uptick in share prices.

Share prices rallied to $74.39 this morning and continued to climb in early trading, having closed for business at $73.46. This compares to a one year low of $63.33.

Shares get buy recommendation​

Analysts working at online investment research operation The Street said they rated Estee Lauder shares as a ‘buy’ on the back of the Raymond James research note and the company’s strong financial dynamics.

“This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate,”​ The Street.com stated in an online post, published today.

“The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."​

Dip in first quarter results hides stronger dynamics​

Although the Estée Lauder Companies reported a significant drop in its first quarter sales and net profit, leading it to reduce its outlook on future revenues, the analysts latest findings suggest that the business dynamics remain strong.

The company said that first quarter net sales fell by 2% to $2.63bn, a figure that represented a fall of 1% when factoring in the negative currency translation against a strong US dollar.

Breaking the revenue figures down by sector, the biggest fall in reported sales was seen in its mainstay skin care category, where sales fell 7% to $1.09bn, whereas the four other categories – make-up, fragrance, hair care and specialized – all saw gains.

On the acquisition trail​

But the wider picture indicates that a prolonged period of growth has put the company in a strong position, which is testified by a number of new acquisitions in recent months.

New additions to the business have included fragrance brand Editions de Parfums Frederic Malle and luxury skin care player Rodin olio lusso, both announced in early November, together with the acquisition of Le Labo prestige fragrances in October.