Time to read: 3min
Estee Lauder (NYSE: EL) reports Q3 2017 earnings tomorrow May 3rd 2017. A giant within the beauty segment, Estee Lauder Companies Inc (EL) Stock manufactures and sells makeup, skin care, fragrance and hair care products. Let’s take a look at the six need-to-know facts about this company.
1) Price Activity
The Estee Lauder share price ended 2016 on a low note, experiencing a decline of 6% between Jan 1st 2016 and Jan 1st 2017*. However, more recently, there has been increased positive sentiment stemming from expectation beating financial reporting for the company. Subsequently, since the start of 2017 the share price has been building positive momentum consistently and is now up over 12 percent year to date.
2) Financial Performance
Estee Lauder has reported a positive earnings surprise in last consecutive four quarters – reporting an average earnings surprise over the past 4 quarters exceeding 10%.*
Estee Lauder reported Q2 2017 earnings of 1.22 per share and was unchanged year on year.*
The consensus estimate for EPS this quarter is 0.73 USD – which would also be unchanged year on year. ** The average growth rate for EPS for Estee Lauder is 14.83%. When measured on a five year annualized basis, EPS growth for Estee Lauder is in-line with the industry average.
3) Strategic Innovation
A robust product portfolio driven by a range of brands covering that of the low price point accessible consumer through to super- luxury brands creates growth for the company. Estee Lauder products are sold in over 150 territories under a wide range of brand names – including Estee Lauder, Clinique, Lab Series, Tommy Hilfiger to name a few.
A key part of the continued success of the company has been a fierce focus on strategic innovation. The company continually expands its global portfolio of recognized brand names and undertakes acquisitions to expand market share within the beauty sector. As a valuable example revenue growth in Q2 2017 was achieved in part by acquisitions of By Kilian, BECCA and Too Faced. These acquisitions added almost a full percentage to revenue growth for the quarter.*
4) Dividends
Dividends per share excluding extraordinary items increased 23.91% year on year as of the last reporting for Estee Lauder. The company has reported an upward trend in dividend payments – which is above industry average. Further to this, on a five year annualized basis, dividend per share growth is higher than that of its relative peers – with a five year average dividend yield of 1.2%, five year average dividend growth rate of 24.9% and payout ratio of 42.61%.*
Estee Lauder has been experiencing slowing growth in Hong Kong as well as reduced footfall in US department stores. In addition a contraction in consumer spending in the Middle East has been damaging to bottom line for the company. This has been compounded by increased overhead from store operating costs as well as underperformance of their MAC brand in the US.
Competition has been mounting in the beauty segment across these markets and revenues have also been hurt by currency dynamics as the dollar grows stronger – specifically currency effects are predicted to reduce sales by 2% this quarter.
6) Eye on Technology
Estee Lauder operates in beauty products segment. Company CEO, Fabrizio Freda, has implemented plans to capture the growing “selfie generation” revenue stream. This is achieved by adapting products and services to incorporate technological features that meet this new demand.
Living in an age where consumers take increasing numbers of photos and videos of themselves drives business for beauty companies like Estee Lauder and they are targeting this market directly through the use of social media alongside further initiatives.
Overall the outlook is moderate to positive for Estee Lauder shares for the short to medium term. The ability to drive growth in slowing areas whilst harnessing the power of technology to capture increasing market share will lead to stronger long term growth prospects for the company.
This article is not an investment advice.
* Past performance is not a reliable indicator of future performance.
** Forecasts are not reliable indicator of future performance.
