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On Friday, Citi maintained a Neutral rating on Estee Lauder (NYSE:EL) shares while increasing the price target to $60 from $55. The adjustment follows Estee Lauder’s fiscal third-quarter 2025 results, which showed a 9% operational sales growth (OSG) decline, aligning with market projections. Despite the OSG dip, the company outperformed on gross margin (GM), operating margin (OM), and earnings per share (EPS). According to InvestingPro data, Estee Lauder maintains impressive gross profit margins of 73.15%, though the stock has declined over 55% in the past year. Current analysis suggests the stock is trading below its Fair Value.
Estee Lauder introduced its fiscal year 2025 guidance, anticipating a weaker fourth quarter due to persistent challenges in Travel Retail (TR) and subdued consumer sentiment in China. However, the company is optimistic about a rebound in sales growth in fiscal year 2026, assuming tariff alleviation will take place. Citi’s analyst noted Estee Lauder’s market share gains in the United States, China, and Japan but expressed concerns over the limited visibility into operational sales growth improvement for fiscal year 2026. This caution is particularly due to the reliance on tariff relief to boost consumer sentiment. InvestingPro analysis reveals that 7 analysts have recently revised their earnings expectations downward, though the company maintains strong liquidity with a current ratio of 1.37.
The report further highlighted potential headwinds for Estee Lauder’s profitability and EPS in fiscal year 2026, stemming from tariff expenses. Estee Lauder is actively seeking mitigation strategies, which may include expanding the Post-Recall Gross Profit (PRGP). However, the benefits from these strategies could be counterbalanced by ongoing investments aimed at stimulating consumer sales.
Citi’s revised price target reflects a balanced view of Estee Lauder’s market share gains and the execution of mitigation strategies against the backdrop of continued pressure in Mainland China and Asia’s Travel Retail, as well as tariff-related challenges affecting the company’s financial performance. The firm’s stance remains cautious due to the low visibility on Estee Lauder’s operational sales growth and the impact of tariffs on the company’s top and bottom lines.
In other recent news, Estee Lauder Companies Inc. reported its fiscal third-quarter earnings for 2025, surpassing expectations with an earnings per share (EPS) of $0.65, significantly higher than the forecasted $0.31. Revenue also exceeded projections, reaching $3.55 billion against an anticipated $3.52 billion. Despite this strong performance, the company faces challenges with a projected organic sales decline of 8% to 9% for the fiscal year and a steeper decline of 12% to 16% expected for the fourth quarter. Estee Lauder’s management remains optimistic about achieving sales growth in fiscal year 2026, driven by market share gains in key regions such as the United States, China, and Japan. The company is also focusing on innovative strategies and expanding its presence in faster-growing channels like Amazon (NASDAQ:AMZN) and TikTok Shop. In light of these developments, Goldman Sachs adjusted its price target for Estee Lauder from $70 to $67, maintaining a Neutral rating. Estee Lauder continues to navigate market challenges, including a significant drop in Travel Retail sales, while implementing strategic initiatives to support future growth.
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