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On Friday, Canaccord Genuity maintained a Hold rating on Estee Lauder (NYSE:EL) shares and increased the price target to $76 from $75. The adjustment reflects updated estimates and valuation multiples ahead of the company’s earnings report. Canaccord’s analyst pointed out that Estee Lauder, currently valued at $30.69 billion, is poised to begin a new phase in 2025 with a fresh executive team but will likely encounter both controllable and uncontrollable challenges. According to InvestingPro data, the company trades at a high P/E multiple of 150, suggesting investors are pricing in significant future growth potential.
The uncontrollable headwinds identified include the significant China and Asia travel retail channel and the normalization of global beauty demand. On the other hand, controllable issues involve the company’s struggle to maintain market share amid heightened competition and a perceived lag in innovation and new product offerings. Despite these challenges, the company maintains impressive gross profit margins of 72.36% and operates with healthy liquidity, as indicated by its current ratio of 1.32.
For the second quarter of fiscal year 2025, which ended in December, Canaccord predicts that Estee Lauder’s sales will decline by 7.5%, a slightly more pessimistic view than the Street’s consensus of a 7.0% decrease and within the range of the company’s own guidance of a 6% to 8% drop. The firm also forecasts an adjusted earnings per share (EPS) of $0.32, aligning with the Street’s expectations and falling within Estee Lauder’s projected EPS guidance of $0.20 to $0.35.
This price target increase comes as Estee Lauder attempts to navigate a complex market environment while implementing a transition in its leadership team. The company’s performance in the upcoming earnings report will be closely watched for signs of how it is managing these various factors.
In other recent news, Estee Lauder has seen several significant developments. The company’s upcoming earnings report, scheduled for February 4, 2025, is anticipated to meet second fiscal quarter expectations and aim for sequential improvement in the third fiscal quarter, according to Piper Sandler. The firm has raised Estee Lauder’s price target to $98, based on a revised multiple of around 16 times the fiscal year 2026 EV/EBITDA, and reiterated its Overweight rating.
Meanwhile, TD Cowen analyst Oliver Chen has increased the price target for Estee Lauder to $80.00, maintaining a Hold rating. Chen’s assessment is based on factors such as the company’s transition under new leadership and subdued demand from Chinese consumers.
In addition, Estee Lauder is reviewing its portfolio of beauty brands, potentially leading to the sale of some brands. This review is being conducted with the assistance of Evercore Inc.
On the board front, Ronald S. Lauder has retired, with Eric Zinterhofer, a founding partner of private equity firm Searchlight Capital Partners (WA:CPAP), L.P., elected as a Class II director.
Despite a 5% decline in organic sales for the first quarter of fiscal 2025, Estee Lauder’s shares experienced notable gains following robust quarterly results from Swiss luxury group Richemont (SIX:CFR), suggesting a favorable environment for related companies. These are some of the recent developments surrounding Estee Lauder.
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