EL- Embedded Expectations Analysis - 2019 04 01
The Estée Lauder Companies Inc. (EL:USA) currently trades near historical highs relative to UAFRS-based (Uniform) Earnings, with a 27.4x Uniform P/E, implying bullish expectations for the firm. However, management is concerned about their fragrance sales, prestige makeup brand market share, US and Middle Eastern market growth opportunities, and new product launches.Specifically, management may be concerned about their ability to offset fragrance category declines with luxury and seasonal fragrance brand strength, as well as the impact of the Bon-Ton department store bankruptcy on 2019 performance. In addition, they may be concerned about their ability to increase market share, the potential of new product launches, and the negative gross margin impact of reclassifying cost of goods sold. Also, they may be exaggerating their ability to use data analytics and locally relevant insights to engage customers, and generate growth in the US and Middle Eastern markets. Finally, management may be exaggerating the global success of Clinique's Dramatically Different Moisturizer franchise, and may lack confidence in their ability to sustain market share in their prestige makeup brands.
Estee Lauder Companies is a manufacturer and marketer of skin care, makeup, fragrance and hair care products. The company's products are sold under a number of brand names including: Estee Lauder, Clinique, Origins, MzAzC, Bobbi Brown, La Mer, Jo Malone London, Aveda and Too Faced. The company is also the global licensee for fragrances, cosmetics and/or related products sold under various designer brand names. The company's products include skin care, makeup and related items such as compacts, brushes and other makeup tools, fragrance sold in various forms, hair care, and other ancillary products and services.
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