Rothschild sees global beauty sector stabilising, upgrades L’Oréal, Beiersdorf

Investing.com -- Rothschild said the global Beauty sector is beginning to stabilise after a slowdown in the US and China, and expects growth to return to its long-term 4 to 4.5% range next year. But it warned that trends are turning over faster and competition is intensifying, favouring companies with broad portfolios and consistent investment in innovation, marketing and technology.

Analyst said L’Oréal remains the only group that has mastered the complexity of the global Beauty market. It upgraded the stock to Buy from Neutral, calling the recent pullback a compelling entry point.

Rothschild said the company’s balanced portfolio and sector-leading investment should allow it to sustain about 6% organic sales growth over the long run, roughly 150 basis points above the industry.

It expects about 30 basis points of annual margin expansion and raised its 2026 and 2027 earnings forecasts by 3%. The price target increases to €410 from €370.

Beiersdorf was reiterated at Buy. Rothschild said the Nivea owner has broadened its portfolio across price points and geographies under CEO Vincent Warnery and remains positioned for above-market growth. It forecasts about 5% organic sales growth from 2026, supported by gross margin improvement and steady operating margin expansion of about 30 basis points a year.

The price target falls to €130 from €141 due to a higher assumed cost of capital, though the bank expects multiple expansion as growth recovers.

Rothschild downgraded Estée Lauder to Sell from Neutral, arguing the market has moved too far ahead of a realistic margin recovery. It said the group is early in its transformation and needs deeper investment in channels, innovation and marketing to close the gap with peers. Rothschild expects operating margins of 9.6% in 2026 and 11.7% by 2028, well below consensus.

It cut its price target to $70 from $83, saying the current valuation already prices in a stronger margin rebound than is likely.

Rothschild launched coverage of Puig and Coty with Neutral ratings, citing slowing growth in fragrances, their largest category. For Puig, Rothschild expects about 5% sales growth and limited margin upside, while highlighting the need for heavier investment in skincare and makeup.

For Coty, it forecasts about 3% organic growth from 2027 and limited margin expansion, noting that leverage and the timing of strategic decisions on Wella and its Consumer division remain key uncertainties.