Estee Lauder jumps as analyst upgrades the stock to Strong Buy

Investing.com -- Raymond James lifted Estee Lauder to Strong Buy from Market Perform, arguing that the company’s turnaround is now moving “from story to execution” as operating trends improve and visibility around earnings recovery increases.

Shares in the cosmetics giant jumped around 4% in U.S. premarket trading.

Analyst Olivia Tong added the stock to its Analyst Current Favorite list and set a $130 price target, saying fiscal 2025 (FY25) likely marked the earnings trough.

Improving market share trends in the U.S. and a rebound in category growth in China are supporting more consistent sales and profit growth, according to Tong.

Travel Retail, which had been a major drag in recent years, “should be less of a headwind from here,” while a shift toward faster-growing retail channels, margin rebuilding and ongoing savings from the Profit Recovery & Growth Plan (PRGP) are expected to support higher investment in long-term growth drivers, the analyst said. 

In the note, Tong highlighted improving performance in Estee Lauder’s two largest markets. In the U.S., the company is benefiting from stepped-up innovation, brand mix changes and marketing.

Meanwhile, the company’s retail share in China is rising again, with double-digit retail sales growth in the first fiscal quarter of 2026, outpacing category growth, and improved performance during major shopping events.

For the 11.11 festival, the Estee Lauder brand climbed to second place on Tmall from fourth a year earlier, while lowering promotional intensity.

Tong also pointed to progress under the Beauty Reimagined strategy, which is accelerating speed to market and modernizing marketing efforts. Estee Lauder is targeting more than 25% of fiscal 2026 sales from new products and plans to triple the share of launches developed in under 12 months.

Cost savings generated under the Profit Recovery & Growth Plan are being redirected toward brand investment, including more contemporary celebrity partnerships aimed at attracting younger consumers.

"The combination of faster innovation and more relevant marketing is also consistent with EL’s sharper pricing/promo, driving sales and margins," Tong wrote. 

The analyst expects fiscal 2026 to mark the start of a multi-year profit recovery, forecasting a 35–36% earnings compound annual growth rate from fiscal 2025 to 2028, well ahead of peers. 

"The PRGP currently targets $1.1-1.4B in gross savings, inclusive of a 5,800-7,000 headcount cut, and we see upside to current targets as outsourcing and centralized procurement ramps while simplification drives additional savings," she noted. 

Tong estimates that, based on its 2026 sales outlook, every $100 million of net savings would add roughly 70 basis points to operating margin.

Operating margin is forecast at 12.0% in fiscal 2026, with a bullish scenario pointing to a return to mid-teens margins by fiscal 2028 as savings scale and flow more directly to profitability.