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3 Reasons Why Estee Lauder Can Add Sheen to Your Portfolio

Zacks Equity Research

The Estee Lauder Companies Inc. EL is well positioned, owing to its robust online business and strong travel retail network. These along with gains from product launches and a solid emerging market presence have helped the company put up a splendid record.

Let’s delve deeper into the aspects, which are likely to keep driving this Zacks Rank #2 (Buy) stock, which has surged 47.1% in a year compared with the industry’s growth of 36.6%.

Online Business Strength

Estee Lauder, which shares space with Coty COTY, has a strong online business, which is expected to be a major growth engine for the upcoming years. The company is implementing new technology and digital experiences, including online booking for each store appointment, omnichannel loyalty programs and high-touch mobile services. These initiatives and the company’s digital-first mindset have been boosting its online sales. In the fourth quarter as well as fiscal 2019, the company’s e-commerce sales continued to boom and witnessed double-digit growth across all markets where it has established e-commerce operations. The company’s online business is primarily fueled by the United States, China and the U.K. Also, online markets in Spain, Greece, Israel and India are expanding rapidly and present solid growth opportunities. Well, the company is on track with augmenting omnichannel capabilities to seamlessly connect online and offline businesses.

Travel Retail a Major Driver

Estee Lauder has been strongly focused on enhancing its travel retail business, which is a major sales driver. Travel retail sales were sturdy in fiscal 2019, with broad-based growth in most brands, regions and categories. Expanded targeted reach, presence of wide assortments and easy shopping facilities are boosting travel retail sales. The travel retail business has been particularly growing strongly in Asia. Additionally, Estee Lauder’s travel retail sales have been benefiting from a rise in traffic, effective launches and impressive marketing strategies. The company is committed to make more efforts to enhance conversions through initiatives. To this end, it has been undertaking various endeavors like better customer insights, enhanced merchandising and improved digital marketing.

Solid Record & Outlook

Backed by the aforementioned factors and other upsides, Estee Lauder has been witnessing remarkable top and bottom-line trends. With the fourth-quarter fiscal 2019 results, the company marked its 20th and 10th straight quarter of earnings and sales beat, respectively. Additionally, both metrics improved year over year. Focus on innovation along with prudent marketing and advertising strategies fueled brand performance. Moreover, savings from the Leading Beauty Forward initiative provided additional financial strength for further investments.

Management expects the global prestige beauty industry to grow 6-7% in fiscal 2020. Well, the company expects to outperform the industry in fiscal 2020, backed by strong demand for its premium products and other brands. That said, management expects net sales to rise 7-8% in fiscal 2020. Further, adjusted earnings of $5.90-$5.98 per share indicate an improvement of 10-12% from $5.34 delivered in fiscal 2019.

Clearly, Estee Lauder is set to keep its sturdy show on.

Don’t Miss These Cosmetic Stocks

e.l.f. Beauty, Inc. ELF, with a Zacks Rank #1 (Strong Buy), has an impressive earnings surprise record. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avon Products AVP, with a Zacks Rank #2 (Buy), has a long-term earnings per share growth rate of 7.5%.

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