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Estee Lauder (EL) Q1 Earnings Likely to Grow Y/Y: Here's Why

Estée Lauder Companies Inc EL is slated to report first-quarter fiscal 2018 results on Nov 1. The company’s results are expected to benefit from rising consumer spending on beauty and personal grooming products, owing to improvements in consumer confidence. Moreover, the rise of e-commerce has been boosting the beauty space, which bodes well for the company. Considering these factors, the company’s earnings and sales are expected to depict a year-on-year growth this earnings season.

Strong Demand for Beauty Products to Drive Growth

A strong portfolio of globally recognized beauty brands and adequate presence in key markets has been aiding significant growth for Estée Lauder. Moreover, rising demand from consumers for beauty products, particularly in the luxury arena and in makeup, has resulted in robust growth. Analysts polled by Zacks predict sales growth of 14.4% in the company's makeup division to reach $1335 million in the upcoming results.

Further, the Zacks Consensus Estimate for sales in the fragrance, skin care and hair care categories are expected at $470 million, $1,171 million and $138 million respectively. These sales estimates indicate a rise of 6.3% for both fragrance and skin care categories from the prior-year figure, while the hair care segment is expected to increase 1.5%. While the hair care segment remained weak in fourth-quarter fiscal 2017, improvements undertaken to strengthen this segment are expected to provide positive yields in the to-be-reported quarter and in fiscal 2018.

From a geographical perspective, Estée Lauder has strengthened its position in the Americas through the acquisitions of Too Faced, BECCA and By Kilian. The Zacks Consensus Estimate of sales from the Americas is expected at $1,350 million in the first quarter, depicting a growth of 9.5% from the year-ago period. The consensus mark for Asia/Pacific revenues is pegged at $645 million, reflecting a rise of 9.3%. Further the Zacks Consensus Estimate for revenues from the Europe, the Middle East & Africa region is pegged at $1,153 million, depicting growth of 10.4%.

Considering strong-growth expectations across Estée Lauder’s product categories spread across a number of key market locations, analysts polled by Zacks expect net sales of $3,164 million during the first quarter, up 10.8% from the prior-year period. Also, management predicts sales growth of 9-10% in the first quarter. Notably, the company has surpassed top-line estimates in the trailing two quarters, while it has been registering year-over-year growth in the same for almost eight quarters now. 

Estee Lauder Companies, Inc. (The) Price, Consensus and EPS Surprise

A Confident Earnings View

Sustained growth across most product categories also led management to provide a positive earnings view. For the first quarter, management expects earnings to be in the range of 94-97 cents which marks an increase of 12-15% from the prior-year earnings of 84 cents. The Zacks Consensus Estimate of earnings for the said period is currently pegged at the higher end of management guidance at 97 cents.

Estée Lauder has been impressing investors with better-than-expected earnings for 12 straight quarters now. Shares of the company have gained 29.3% in the past year, significantly outperforming the industry’s decline of 7.1%.

What does the Zacks Model Unveil?

Our proven model shows that Estée Lauder is likely to beat earnings estimates this quarter. A stock needs to have a positive Earnings ESP and a Zacks Rank #1(Strong Buy), 2(Buy) or 3(Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Estée Lauder has an Earnings ESP of +0.34% and currently has a Zacks Rank #2 that makes us reasonably confident of an earnings beat.

Stocks With Favorable Combinations

Here are some companies which, according to our model, have the right combination of elements to deliver earnings beat this quarter:

B&G Foods Inc BGS has an Earnings ESP of +4.17% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pinnacle Foods Inc PF has an Earnings ESP of +1.36% and carries a Zacks Rank #2.

United Natural Foods, Inc UNFI has an Earnings ESP of +6.33% and holds a Zacks Rank #2.

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Estee Lauder Companies, Inc. (The) (EL): Free Stock Analysis Report
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