Bullish indicating open at $55-$60, IPO prices at $37
On Thursday, Piper Sandler analysts reported a positive outlook for beauty stocks, following a comprehensive review of beauty ingredient suppliers. The sector has shown improving trends and manageable pricing dynamics after the first quarter earnings season. Suppliers have experienced a month-to-month improvement in demand, with strength noted in the fragrance category. Despite a cautious stance for the second quarter and the latter half of the year, the analysts observed that high-end and fine fragrances are growing at a healthy rate, while mass fragrances also demonstrate robust strength. According to InvestingPro data, this positive sentiment is reflected in analyst forecasts, with 13 analysts recently revising their earnings expectations upward for key players in the sector.
The beauty industry began the year with softer demand, but sequential improvements were evident, with April showing better performance and May maintaining a healthy trend. The review highlighted that suppliers are planning to increase prices to counteract tariffs, a move that is expected to have only modest elasticity on demand. Piper Sandler’s coverage includes companies such as Inter Parfums (EPA:IPAR), Inc. (NASDAQ:IPAR), Bath & Body Works, Inc. (BBWI), Coty Inc . (NYSE:COTY), e.l.f. Beauty, Inc. (NYSE:ELF), Estée Lauder Companies Inc. (EL), Revlon, Inc. (REV), and Sally Beauty Holdings, Inc. (NYSE:SBH), all rated as Overweight.
The analysts noted that while cosmetics and sun care categories have been softer, there is an expectation for growth to return, providing some optimism for the sector. Additionally, the resilience of the fragrance category suggests less impact from price increases, with companies like IPAR, BBWI, and COTY, which are investing in this area, likely to benefit. InvestingPro analysis shows BBWI is currently trading below its Fair Value, with strong fundamentals including a P/E ratio of 8.66 and a current ratio of 1.48, indicating solid liquidity. The report also mentioned that some companies have been stocking up ahead of tariffs, aligning with minor pre-buying from brands.
Piper Sandler’s cautious yet improving outlook is based on supplier commentary and order books for May, which suggest that the uptick in underlying consumer demand could be sustainable. While there is a sense of caution regarding costs and the potential impact of tariffs, the analysts believe that companies like ELF and IPAR are well-positioned to implement pricing strategies effectively. The report concludes that, despite the need to monitor the situation, the current pricing plans should place companies in an okay position. For detailed financial metrics and additional insights on these beauty stocks, including comprehensive Pro Research Reports covering 1,400+ US equities, visit InvestingPro.
In other recent news, Bath & Body Works has announced a significant leadership change with Daniel Heaf taking over as CEO, succeeding Gina Boswell. The company pre-announced its first-quarter earnings per share (EPS) of $0.49, surpassing the consensus estimate of $0.45, with a 3% increase in sales contributing to this strong performance. Bath & Body Works reiterated its fiscal year 2025 EPS guidance range of $3.25-$3.60, aligning with analyst consensus despite increased tariffs on China. Analysts from Citi have raised the company’s price target to $42, maintaining a Buy rating, while TD Cowen analysts continue to support a $48 target, also maintaining a Buy rating. UBS analysts raised their price target to $36, keeping a Neutral rating, and BofA Securities reiterated a $45 target, expressing optimism about the leadership change. BMO Capital Markets maintained an Outperform rating with a $50 price target, citing the company’s strong start to the year and potential for growth. Analysts view Heaf’s appointment as a strategic move to drive innovation and growth, leveraging his experience from Nike (NYSE:NKE) and Burberry (LON:BRBY). The company’s ability to meet its first-quarter expectations and maintain its outlook for the year underscores a robust operational foundation.
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