Pointing to the company’s strong portfolio of brands and the continued improvement in its financial results in the face of tough economic conditions, analysts at the company have recommended investing in the shares.
“The company [Estée Lauder] is currently undertaking initiatives to reduce overheads and optimize inventory levels, which augur well for future operating performance,” Zacks said in a statement.
“Our long-term recommendation on Estée Lauder is ‘Outperform’ as we anticipate it to perform well above the broader market,” the statement added.
Getting ahead in difficult times
Estée Lauder, which owns some of the leading prestige brands, including the category-leading naturals brand Aveda, has pulled through difficult times following a significant restructuring plan.
The latest analyst rating is a marked difference from last year, when the company was still struggling in the face of mounting business costs and an economic downturn that was mainly affecting consumer spend in the prestige category.
In April 2009 an analyst from UBS said he was downgrading Estée Lauder because the company would continue to struggle due to its reliance on luxury and travel retail.
Fortunes rebound from last year's low
Up to that point the price of Estée Lauder shares had fallen 13 percent, after it had announced a 30 percent fall in net income for the second quarter and a 6 percent decline in net sales.
However, pivotal to the company’s recovery was the announcement of a restructuring program in February 2009 involving the loss of 2,000 jobs; some 6 percent of the workforce.
As a result of this restructuring program the company’s second quarter results, released at the end of January this year, showed that sales for the period climbed by 10.8 percent.
Sales up more than 10 percent
Sales for the quarter rose to $2.26bn, up from $2.04bn in the corresponding quarter last year, which represented growth of 6 percent excluding the positive impact of foreign currency exchange.
Likewise net earnings increased by 89.8 percent to $396.9m, compared to $209.1m for the corresponding quarter, while operating earnings rose by 47.8 percent to $399.6m, up from $270.3bn.
The company said that its earnings were significantly boosted by cost reductions attributable to its restructuring, which delivered estimated savings of $83m during the quarter.