Estee Lauder (NYSE:EL) shares plunged more than 11% premarket as its earnings and revenue topped consensus expectations, but guidance fell short of consensus estimates.
The beauty products company reported Q3 EPS of $0.97, $0.48 better than the analyst estimate of $0.49. Revenue for the quarter came in at $3.94 billion, up 5% year-on-year and above the consensus estimate of $3.91 billion.
The company said its organic net sales increased 6% primarily due to double-digit growth in Europe, the Middle East & Africa, driven by stronger sales in Asia travel retail. The growth in Asia travel retail was driven by higher shipments, reflecting significant sequential improvement in retail sales trends.
"For the third quarter of fiscal 2024, we delivered our organic sales outlook, exceeded expectations for profitability and continued to improve working capital," said Fabrizio Freda, the company's President and Chief Executive Officer. "La Mer, Estée Lauder, Jo Malone London, Le Labo, and The Ordinary led organic sales growth, driven by beloved hero products and highly sought innovation. Asia travel retail returned to organic sales growth, as developed and emerging markets across Asia/Pacific, EMEA, and Latin America further contributed."
Despite the earnings and revenue beat, EL's Q4 EPS guidance of between $0.19 and $0.29 was well below the consensus of $0.76. In addition, the full-year 2024 EPS guide of $2.14 to $2.24 was just below the consensus of $2.25.
Following the earnings release, analysts at Goldman Sachs said in a research note that EL has been "under sizable pressure over the past several quarters as a result of its Asia travel retail challenges, which has negatively impacted investor confidence."
"While Q3 stronger travel retail results are encouraging, lowered full year organic sales outlook is disappointing. Given China’s historical significance (incl. Hainan) to EL’s growth story, the uncertainty around its path to recovery (esp. given broader macro challenges in the region) remains a key investor concern," stated the bank. "Outside of China, we believe continued weakness in its developed market business likely necessitates a greater re-investment profile." The firm kept a Neutral rating on the stock.