Factors To Know Ahead Of Estee Lauder's (EL) Q2 Earnings

The Estée Lauder Companies Inc. (NYSE:EL) is scheduled to release second-quarter fiscal 2019 results on Feb 5, before the opening bell. This cosmetics biggie boasts a splendid surprise history and has been reporting earnings and sales beats for seven straight quarters now.

The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.53, which has inched up by a notch over the past 30 days and also compares favorably with $1.52 per share reported in the year-ago period. For revenues, the same currently stands at $3,921 million, showing an improvement of approximately 4.7% from the year-ago quarter number.

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

Key Factors Influencing Estee Lauder

Growth in travel retail business is a major driving factor for Estee Lauder. In the first quarter of fiscal 2019, travel retail sales continued to accelerate backed by broad-based growth across countries and brands. Currently, the channel is benefiting from unique product range, impressive marketing strategies and higher conversions through better customer insights.

We also note that strategic buyouts undertaken by the company have been playing key role in enhancing the company’s top-line performance. The acquisitions of BECCA and Too Faced have strengthened the company’s fastest growing prestige portfolio. The investment in DECIEM, a fast-growing multi-brand company, is likely to aid beauty sales. Apart from skin care, Estee Lauder has acquired high-end fragrance and lifestyle brands.

Additionally, Estee Lauder has a strong online presence and expects it to continue in the quarters ahead. The company has successfully expanded its online business footprint in about 40 countries. It plans to continue boosting sales in this channel by adding new sites and expanding retailer distributions.

Certainly, rising demand for skincare products, which account for a significant chunk of sales, is an added positive. The company is also poised to gain from strength in the haircare category along with improved trends in the makeup and fragrance businesses.

Markedly, the Zacks Consensus Estimate for the Skin Care, Makeup, Fragrance and Hair Care segment’s net sales is pegged at $1,624 million, $1,567 million, $570 million and $146 million, up 8.7%, 3.4%, 0.9% and 1.4%, respectively, from the prior-year quarter.

While these tailwinds raise optimism, Estee Lauder is consistently coping up with changing consumer preferences. Along with this the availability of cheaper alternatives gives rise to stiff competition. Going ahead, the company expects prestige beauty growth to moderate in China, especially in the second half of the fiscal year.

Nevertheless, management expects continued opportunities in the global prestige beauty industry, which is currently anticipated to grow 5-6% in fiscal 2019. Also, the company is on track with the implementation of the Leading Beauty Forward initiative, directed toward efficient management of costs and operations. All said, management expects net sales to improve 4-5% with adjusted earnings in the band of $1.47-$1.50 per share during the second quarter.

What the Zacks Model Unveils

Our proven model shows that Estee Lauder likely to beat bottom-line estimates this quarter. For this to happen, the stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Estee Lauder has a Zacks Rank #3 and an Earnings ESP of +1.16%, which makes us reasonably confident of an earnings beat.

3 More Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these too have the right combination of elements to post earnings beat:

Church & Dwight (NYSE:CHD) , a Zacks #2 Ranked stock, has an Earnings ESP of +2.80%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Monster Beverage Corporation (NASDAQ:MNST) has an Earnings ESP of +0.31% and a Zacks Rank #2.

Energizer Holdings (NYSE:ENR) has an Earnings ESP of +7.83% and a Zacks Rank #3.

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