Forget Estee Lauder, These 3 Cosmetics Stocks Look Better

A decelerating manufacturing and services sector, coupled with a slow job data in August have created an ominous atmosphere leading analysts to anticipate a soft second-half 2016. Additionally, the market is apprehensive under fear of a rate hike before the year ends. In this scenario it is prudent to rearrange your portfolio and offload unyielding stocks while placing in stocks that can enrich your portfolio instead. The Estee Lauder Companies Inc. (NYSE:EL) is one such stock that is better offloaded right now. Let’s find out why.

Woes Behind the Stock

Share price of Estee Lauder declined almost 4.0% in the last three months. Moreover, analysts are not very optimistic about the stock and most of their estimates have moved southward for fiscal 2017 and 2018 in the last 30 days. The estimate for fiscal 2017 and fiscal 2018 declined 2.8% and 4.9% respectively during the same period. This clearly implies that analysts covering the stock are not convinced about Estee Lauder’s performance in the near future.

In spite of reporting positive surprises for the trailing four quarters, Estee Lauder issued a cautious guidance for fiscal 2017 during the fourth quarter fiscal 2016 conference call. Constant currency sales and earnings growth are expected in the range of 6–7% and 8–10%, respectively which was lower than market expectations. The company expects slowing sales growth in the Middle East, US and UK as retailers reduce inventory levels due to lower consumer spending.

ESTEE LAUDER Price, Consensus and EPS Surprise

ESTEE LAUDER Price, Consensus and EPS Surprise | ESTEE LAUDER Quote

The company’s dismal results and other headwinds with which it is grappling are well reflected from the downtrend in the estimates.

With Estee Lauder’s share price tumbling and estimates moving southward, it is wise to discard the stock, at least for the time being. Rather, you can shift your focus to better-ranked cosmetics toiletries stocks which hold Zacks Rank #1 (Strong Buy) or #2 (Buy) . You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.. These stocks are backed by positive estimate revisions, strong earnings per share growth expected in the long term as well as sturdy fundamentals.

3 Picks

You can count upon Inter Parfums Inc. (NASDAQ:IPAR) ), which flaunts a Zacks Rank #1 (Strong Buy) and a long term earnings growth rate of 15%. The share price of this stock gained 10.78% in the last three months. It is expected to witness earnings growth of 11.2% in 2016 and 15.6% in 2017. The Zacks Consensus Estimate too has moved up over the past 60 days.

INTER PARFUMS Price, Consensus and EPS Surprise

INTER PARFUMS Price, Consensus and EPS Surprise | INTER PARFUMS Quote

Another stock in the cosmetics toiletries sector worth considering includes Nu Skin Enterprises Inc. (NYSE:NUS) ) which also carries a Zacks Rank #2 (Buy). The share price gained almost 42% in the last three months. Nu Skinhas a long-term earnings growth rate of 8.13%. The company’s operating results have shown improvement in the near term, primarily due to innovation.

Further, this skin care and nutritional products retailer raised its outlook for 2016 owing to new product launches and a favorable view on currency. The company is expected to witness earnings growth of 2.40% in 2016 and 14.2% in 2017.

NU SKIN ENTERP Price, Consensus and EPS Surprise

NU SKIN ENTERP Price, Consensus and EPS Surprise | NU SKIN ENTERP Quote

Last but not the lease Coty Inc. (NYSE:COTY) will also add value to your portfolio. The stocks boasts a Zacks Rank #1 (Strong Buy). The New York-based beauty products company delivered an average positive earnings surprise of 50.03% and targets a long term EPS growth of 9.5%. Moreover, over the past 30 days, fiscal 2018 earnings estimates have gone up almost 2.5%.

COTY INC-A Price, Consensus and EPS Surprise

COTY INC-A Price, Consensus and EPS Surprise | COTY INC-A Quote

Where Do Zacks' Investment Ideas Come From?

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