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On Thursday, Goldman Sachs analyst Bonnie Herzog adjusted the firm’s outlook on Estee Lauder (NYSE:EL) shares, reducing the price target from $70.00 to $67.00, while maintaining a Neutral stock rating. According to InvestingPro data, the stock currently trades at $58.84, having declined over 51% in the past year. Analyst targets range from $55 to $120, reflecting mixed sentiment about the company’s recovery potential. The adjustment followed Estee Lauder’s fiscal third-quarter earnings, which surpassed expectations with a significant earnings per share (EPS) beat. Despite organic sales declines that were in line with predictions, Estee Lauder benefited from its Post-Recovery Growth Plan (PRGP), contributing to a gross margin expansion of over 300 basis points during the quarter. InvestingPro analysis shows the company maintains impressive gross profit margins of 73.15%, though it’s currently not profitable over the last twelve months. This increase in gross margin positively impacted both earnings before interest and taxes (EBIT) and EPS.
For the fiscal year 2025, Estee Lauder’s management has forecasted an organic sales decline of between 8% and 9% and an adjusted EPS range of $1.30 to $1.55. The guidance for the fourth fiscal quarter suggests an organic sales decline of 12% to 16%, which is a steeper drop than the previous Goldman Sachs and consensus estimates of a 3.7% and 6.2% decline, respectively. Additionally, the adjusted EPS for the fourth quarter is projected to be between a loss of $0.12 and a gain of $0.13, contrasting with earlier estimates of $0.42 and $0.29 from Goldman Sachs and consensus.
Management anticipates a more pronounced double-digit decline in global travel retail sales for the fourth fiscal quarter, following a 28% decrease in the third quarter. Despite the weaker than expected outlook for the fourth quarter, management remains confident in the company’s ability to achieve sales growth in fiscal year 2026. This optimism is based on several factors, including sequential improvements in underlying trends excluding travel retail, gains in market share across multiple brands in key markets such as the United States, China, and Japan, reduced risks associated with travel retail sales, and strategic initiatives aligned with their Beauty Reimagined vision.
Estee Lauder is actively pursuing growth in faster-growing channels, including Amazon (NASDAQ:AMZN), TikTok Shop, and Shopee, and is increasing investment in consumer-facing activities, which saw a 480 basis point rise in the third quarter. The company is also focusing on accelerating innovation to drive future growth. Following these considerations, Goldman Sachs has revised its estimates and set a new 12-month price target for Estee Lauder shares. InvestingPro subscribers have access to 8 additional key insights about Estee Lauder’s financial health and future prospects, including detailed analysis of its growth potential and market position. Get the full picture with InvestingPro’s comprehensive research report, part of our coverage of 1,400+ top US stocks.
In other recent news, Estee Lauder Companies Inc. reported its third-quarter earnings for fiscal year 2025, surpassing expectations. The company achieved earnings per share of $0.65, significantly exceeding the forecasted $0.31, while revenue reached $3.55 billion, surpassing the anticipated $3.52 billion. Despite these positive financial results, Estee Lauder’s stock experienced a decline, reflecting broader market concerns and challenges such as a significant drop in Travel Retail sales. The company reported that organic sales declined by 9%, with Travel Retail sales dropping by 28%. Estee Lauder also highlighted market share gains in the U.S., China, and Japan, demonstrating resilience amid a challenging macroeconomic environment. The company remains confident in its ability to return to sales growth in fiscal 2026, with plans to focus on maintaining market share gains and accelerating innovation. Additionally, Estee Lauder is undergoing a restructuring program aimed at becoming a leaner and more agile company, with significant progress reported in reducing operating expenses and improving gross margins.
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