Zacks Investment Research has upgraded its recommendation on Estee Lauder from neutral to outperform on the belief that it is anticipated the company will perform ‘well above the market’ in the coming year.
Zacks pointed to the fact that the company had a robust second quarter 2011, which was highlighted by a 34 percent increase in earnings to $343.9m, a performance that significantly outpaced its own estimate of a 23 percent improvement.
Estee Lauder also ended the financial year 2010 on a high note, after announcing that its fourth quarter sales were up in all geographic regions and product categories, led by international businesses particularly in travel-retail and emerging markets.
Cost cutting initiatives
Likewise the company has also introduced a series of initiatives to cut costs, including keeping a tighter grip on merchandizing levels as well as comprehensive restructuring initiatives, all of which has upped profits.
The cost saving initiatives were first introduced in 2009 and were designed to bring in savings of around $500m a year by 2013. In 2010 cost savings of almost $370m were reported, underlining the successful early implementation of the initiative.
The company also won further confidence from the investment world when it recently re-confirmed 2011 financial forecasts that it is hoping to achieve sales growth on a constant currency basis of between 8 – 10 percent.
Estee Lauder's move into the naturals market
Estee Lauder has also successfully moved into the fast-growing market for natural cosmetics through leading brands such as Aveda, Clinique and Origins.
In line with this the company announced earlier this week that it had signed an exclusive product license and supply agreement with natural ingredients supplier Unigen.
The deal relates to the development and commercialization of its proprietary natural ingredients and grants Estee Lauder the rights to any groundbreaking discoveries.