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On Friday, Goldman Sachs reaffirmed its Buy rating on L’Oreal SA (OR:FP) (OTC: LRLCY), a $207.75 billion market cap leader in personal care products, with a steady price target of EUR430.00. According to InvestingPro data, the company maintains impressive gross profit margins of 74.18% and has achieved 5.6% revenue growth over the last twelve months. The endorsement comes after L’Oreal reported Q1 sales that surpassed expectations, demonstrating resilience in a challenging market environment. The company’s organic sales growth reached +3.5%, a figure that was adjusted to approximately 2.6% after accounting for one-time benefits from an IT system transition. This performance exceeded the Goldman Sachs and Visible Alpha Consensus projection of +1%.
L’Oreal’s success was not limited to a single area, as the company experienced gains across all its divisions. L’Oreal Luxe, the luxury segment of the business, saw a +5.8% increase in sales, which adjusts to +2.8% after phasing. The company’s strong financial position is underscored by its 34-year track record of maintaining dividend payments, demonstrating remarkable stability in shareholder returns. This division was particularly bolstered by the continued strength of its fragrance portfolio, which experienced mid-teens growth. The Consumer Products division also fared well with a +2.3% growth, even in the face of a sluggish makeup market, particularly in the United States.
The Dermatological Beauty division reported a +2.7% growth, driven by robust performance in Emerging Markets (EM) and North Asia. However, the North American market presented more of a challenge for this segment. Despite these market-specific difficulties, the overall robust sales figures indicate a strong start to the year for the beauty and cosmetics giant.
Goldman Sachs’ analyst pointed out that the company’s first-quarter results were particularly reassuring following the report from LVMH (EPA:LVMH), another major player in the luxury goods sector. The positive assessment from Goldman Sachs reflects confidence in L’Oreal’s capacity to maintain growth and navigate through market fluctuations effectively.
The company’s stock performance in the coming days will likely reflect investor sentiment following this reaffirmation of a Buy rating and confirmation of the EUR430.00 price target by Goldman Sachs. L’Oreal’s ability to beat sales expectations across its diverse portfolio suggests a stable outlook for the company in the near term. InvestingPro analysis indicates the stock is currently trading near its Fair Value, with additional insights and 8 more exclusive ProTips available to subscribers, including detailed analysis of the company’s financial health score of GOOD (2.89).
In other recent news, L’Oreal’s financial performance and analyst ratings have been a focal point. Berenberg analysts downgraded L’Oreal from a ’Buy’ to a ’Hold’ and lowered the price target to €385.00, citing a cautious outlook on the global beauty market’s growth and L’Oreal’s potential performance. This comes amid expectations of a slower growth rate for the global beauty market in 2025, which could pose downside risks to L’Oreal’s sales forecasts. Meanwhile, Stifel analysts also adjusted their outlook, reducing the price target to €395.00 but maintaining a Buy rating, noting L’Oreal’s underperformance in North America and North Asia. Despite this, they observed robust sales growth in the U.S. Luxe segment and effective expense management, suggesting potential margin expansion in 2025.
Citi analysts maintained a Neutral rating with a price target of EUR350.00, expressing concerns over L’Oreal’s first-quarter organic sales growth, which is projected to be at the lower end compared to peers. They anticipate a challenging quarter due to tough comparisons and SAP implementation phasing. L’Oreal’s fourth-quarter 2024 results showed varied growth across divisions, with total sales surpassing consensus estimates by 2%, and an operating margin aligning with expectations. Despite mixed regional growth, the company’s adjusted earnings per share for FY24 exceeded forecasts by 4%, showcasing some positive aspects in a complex performance landscape.
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