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On Friday, DA Davidson maintained a Buy rating on Estee Lauder (NYSE: NYSE:EL) with a steady price target of $81.00. The firm highlighted that approximately 30% of Estee Lauder's sales are tied to China, a market currently experiencing volatile trends and impacting Asia travel retail. According to InvestingPro data, the stock has seen a significant 33% decline over the past six months, though it maintains impressive gross profit margins of 72%.
Consequently, Estee Lauder has paused its annual guidance, anticipating a decline in organic sales for the second half of 2025, with expectations ranging between a 15% to 16% year-over-year decrease. This forecast contrasts with the previous year's robust channel restocking shipments. Despite current challenges, InvestingPro analysis indicates the company remains undervalued relative to its Fair Value, with 8 additional exclusive ProTips available for subscribers.
The analysis suggests that short-term share price movements could be influenced by the initial statements and actions of Estee Lauder's new CEO. Recent data indicates that Hainan's travel retail sales saw a negative two-year stack in November 2024, marking a downturn after three consecutive months of growth. The $81 price target set by DA Davidson is derived from a 40x multiple of the projected calendar year 2026 earnings per share (EPS) of $2.02.
However, the price target is subject to review following the release of Estee Lauder's second-quarter fiscal year 2025 earnings report, scheduled for February 4, 2025, according to InvestingPro data. Notably, the company has maintained dividend payments for 29 consecutive years, demonstrating long-term financial stability.
In other recent news, Estée Lauder Companies Inc. has seen significant developments in both its financial results and corporate governance. The company reported a 5% decline in organic sales in the first quarter of fiscal 2025, attributed to downturns in mainland China, global travel retail, and Hong Kong SAR.
However, excluding these regions, the company achieved a 1% global sales growth. Adjusted earnings per share reached $0.14, surpassing the previous year's $0.11. Despite these results, Estée Lauder withdrew its full-year outlook for fiscal 2025 and reduced its quarterly dividend from $0.66 to $0.35 per share.
In response to these financial results, analyst firms B.Riley, TD Cowen, and Telsey Advisory Group reduced their price targets, while JPMorgan downgraded the stock from Overweight to Neutral. These changes reflect concerns about Estée Lauder's performance, particularly in the Asia-Pacific region.
In terms of governance, Estée Lauder announced the reelection of its Board of Directors and the ratification of its independent auditors, PricewaterhouseCoopers LLP. The company also announced amendments to its Share Incentive Plan, extending its term to November 8, 2034, and increasing the number of shares available for issuance by 12 million. Furthermore, Richard D. Parsons (NYSE:PSN), a long-standing board member, recently retired due to health reasons.
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