On Monday, Goldman Sachs maintained its Neutral rating on Estee Lauder (NYSE:EL) with a steady price target of $115.00. Estee Lauder reported fourth-quarter earnings per share (EPS) of $0.64, surpassing the Goldman Sachs and FactSet consensus of $0.24 and $0.26, respectively.
The company's organic sales growth for the quarter was up 8%, slightly above expectations, driven by strong performance in the EMEA region, while the Americas and APAC saw weaker results. Despite a marginal miss on gross margins compared to consensus, lower spending on selling, general, and administrative expenses (SG&A) contributed to a higher-than-anticipated EBIT margin for the quarter. Additionally, lower interest expenses and tax rates provided significant tailwinds to EPS.
However, the company's forecast for the fiscal year 2025 fell short of expectations. Management predicts organic sales growth ranging from a decrease of 1% to an increase of 2%, compared to the Goldman Sachs and consensus estimates of 6.9% and 6.7%, respectively.
The expected diluted EPS for FY25 is set between $2.75 and $2.95, which is considerably lower than the Goldman Sachs and consensus projections of $4.37 and $3.97, respectively. For the first quarter of FY25, the company anticipates a decline in organic sales growth between 3% to 5% and diluted EPS between $0.02 and $0.10.
The announcement also included news of CEO Fabrizio Freda's planned retirement at the end of FY25. The feedback from investors suggests that the upcoming management change might be seen positively, as it could lead to a recalibration of expectations. Despite this potential optimism, the significant gap between management's FY25 guidance and market expectations is likely to have a considerable impact on the stock's performance today.
In other recent news, Estee Lauder's fourth-quarter fiscal year 2024 adjusted earnings per share (EPS) significantly exceeded expectations, according to reports from JPMorgan and Citi. The company also announced an 8.0% increase in organic sales and adjusted EBIT of $349 million. However, Estee Lauder's president and CEO, Fabrizio Freda, announced his retirement at the end of fiscal 2025, initiating a search for a successor.
Despite strong fourth-quarter results, the company's guidance for fiscal 2025 fell below consensus estimates. In response, analyst firms such as Stifel, Canaccord Genuity, BofA Securities, and Morgan Stanley have updated their ratings on Estee Lauder. The company also declared a quarterly dividend of 66 cents per share, emphasizing its commitment to shareholder value.
InvestingPro Insights
Estee Lauder's recent financial performance and future outlook present a mixed picture, which is reflected in the company's valuation metrics and analyst revisions. According to real-time data from InvestingPro, Estee Lauder has a market capitalization of $33.54 billion and trades at a high earnings multiple with a P/E ratio of 53.12. The company's gross profit margin stands out at 70.77% for the last twelve months as of Q3 2024, underlining their impressive ability to maintain profitability.
However, analysts have tempered their expectations, with 10 analysts having revised their earnings downwards for the upcoming period. This may be in line with the company's own conservative forecast for FY25. Despite these revisions, Estee Lauder has a notable history of dividend reliability, having raised its dividend for 3 consecutive years and maintained payments for 29 consecutive years. This could be a point of interest for income-focused investors.
InvestingPro Tips for Estee Lauder also highlight that the company's liquid assets exceed short-term obligations, suggesting a strong liquidity position. Moreover, the stock has experienced a significant return over the last week, with a 10.17% total price return, which may catch the attention of momentum investors.
For investors seeking more detailed analysis and additional insights, there are currently 15 more InvestingPro Tips available on https://www.investing.com/pro/EL, which could further inform investment decisions regarding Estee Lauder.
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