Wall Street expects a year-over-year increase in earnings on higher revenues when Estee Lauder (EL) reports results for the quarter ended December 2025. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on February 5. ...

Core Insights - Estee Lauder Companies Inc. and e.l.f. Beauty, Inc. are key players in the cosmetics industry, competing across overlapping product categories while operating at different market segments [1][2] - The cosmetics industry is evolving due to digital engagement, changing consumer preferences, and a focus on value, innovation, and brand differentiation [1] Estee Lauder Overview - Estee Lauder has a market capitalization of approximately $41.3 billion and is recognized as a leader in the prestige beauty sector with a diverse portfolio [2] - The company has shown a return to organic sales growth, with a 3% increase in organic net sales in Q1 of fiscal 2026 and a 300 basis point expansion in adjusted operating margin to 7.3% [3][9] - Adjusted gross margin improved by 60 basis points to 73.3%, driven by procurement efficiencies and reduced promotional intensity [4] - Estee Lauder is gaining market share in key regions such as Mainland China, the U.S., and parts of Western Europe, with strong performance from brands like La Mer and TOM FORD [5] - Product innovation is crucial for Estee Lauder's growth, with new launches enhancing brand relevance and consumer engagement [6] e.l.f. Beauty Overview - e.l.f. Beauty, valued at around $5.1 billion, focuses on affordable, trend-driven products and has achieved its 27th consecutive quarter of net sales growth, with a 14% increase to $343.9 million in Q2 of fiscal 2026 [7][9] - The company gained 140 basis points of market share in its core brand during Q2, reflecting its ability to attract value-conscious consumers [8] - e.l.f. Beauty's growth is supported by expanding distribution and a digitally native operating model, with management projecting a net sales increase of 18-20% for fiscal 2026 [11] Financial Performance and Estimates - The Zacks Consensus Estimate for Estee Lauder indicates a year-over-year sales growth of 4.6% and an EPS increase of 43.7% for the current fiscal year [12] - For e.l.f. Beauty, the current fiscal-year sales estimate suggests a 19.3% increase, while EPS is expected to decrease by 15.3% [14] - Over the past year, Estee Lauder's shares have increased by 39.3%, outperforming the industry growth of 13.2%, while e.l.f. Beauty's shares have declined by 19.8% [15] Valuation and Investment Outlook - Estee Lauder has a forward P/E ratio of 43.8, above its one-year median, while e.l.f. Beauty's forward P/E ratio is 24.71, below its median [17] - Estee Lauder presents a more compelling risk-reward profile due to its operational turnaround and strong earnings growth outlook, while e.l.f. Beauty faces rising margin pressures [19] - Estee Lauder holds a Zacks Rank 2 (Buy), whereas e.l.f. Beauty has a Zacks Rank 3 (Hold) [20]

Group 1 - MAC Cosmetics' senior vice president and global general manager, Aïda Moudachirou-Rébois, is leaving her position, which she took on in 2024, amidst several executive changes at MAC and its parent company, Estée Lauder [1][2] - The makeup category at Estée Lauder experienced a 1 percent decline in reported earnings for the quarter ending September 30, with an operating loss of $15 million, despite new product launches and increased brand awareness from the "I Only Wear MAC" campaign [3] - MAC's decline in face products and overall retail softness contributed to a 5 percent drop in makeup sales, as noted in Estée Lauder's annual report [3] Group 2 - Lisa Sequino has been appointed as the president of Lauder's makeup brand cluster, overseeing MAC, Bobbi Brown, Too Faced, Smashbox, and Glamglow, with the latter three rumored to be for sale [4] - Glamglow has ceased its e-commerce operations in favor of selling through Amazon, indicating potential shifts in brand strategy [4]

Core Insights - Estee Lauder Companies Inc. is focusing on innovation to drive growth and reconnect with consumers in its beauty portfolio, demonstrating that new product launches can generate demand even in a mixed macro environment [2][10] Product Development and Innovation - The company is accelerating product development, exemplified by the launch of Fragrance Atelier in Paris, which utilizes AI to shorten development timelines significantly [3] - Fragrance has become Estee Lauder's strongest-performing category, growing by 13% in the first quarter of fiscal 2026, driven by new luxury brand launches [4] - Innovation is also evident in faster-growing subcategories like skin longevity and clinical solutions, with recent product launches addressing specific consumer concerns [5][10] Competitor Analysis - Coty Inc. is also leveraging innovation for category growth, focusing on fragrance with new product launches and expanding digital distribution [7] - e.l.f. Beauty is achieving growth through high-quality products at competitive prices, resulting in a market share gain and consistent net sales growth [8] Financial Performance and Valuation - Estee Lauder's shares have increased by 9.1% over the past month, outperforming the industry growth of 8.7% [9] - The company trades at a forward price-to-earnings ratio of 44.53X, higher than the industry average of 30.26X [12] - The Zacks Consensus Estimate for fiscal 2026 and 2027 earnings has increased to $2.17 and $2.96, respectively, over the past week [13]

Core Viewpoint - The Hardman Johnston Global Equity Strategy reported strong performance in global equity markets for Q4 2025, with a return of 2.91%, slightly below the MSCI AC World Net Index's gain of 3.29% [1] Group 1: Company Performance - The Estée Lauder Companies Inc. (NYSE:EL) was highlighted as a key contributor to performance within the Consumer Staples sector, showing a turnaround with strong fiscal Q1 2026 results [2][3] - The stock of The Estée Lauder Companies Inc. traded between $48.37 and $120.27 over the past 52 weeks, closing at $116.44 on January 27, 2026, with a market capitalization of $41.96 billion [2] - The Estée Lauder Companies Inc. reported a 3% year-over-year increase in net sales for Q3 2025, driven by double-digit growth in fragrance and modest growth in skincare [4] Group 2: Market Trends - The beauty sector is experiencing resilience, with both volume and value growth, and The Estée Lauder Companies Inc. is positioned well within this context, particularly benefiting from trends in luxury beauty [3] - The company has seen positive developments in key markets, including a successful 11/11 sales event in China, which accounts for 25% of its sales, and stabilization in the US market [3]

Summary of Key Points from the Conference Call Industry Overview - The international high-end beauty market in China achieved high single-digit growth in 2026, but the compound growth rate only returned to 2023 levels, indicating challenges in regaining double-digit growth in the future. The growth drivers include channel recovery and consumer confidence restoration [1][2][3]. Core Insights and Arguments - **Channel Recovery**: The shopping mall channel returned to double-digit growth in 2026, driven by enhanced entertainment experiences and strategic site selection. Online channels, particularly Tmall, saw growth through adjustments in the Double Eleven mechanism, while JD.com performed well with VIP customers. However, Douyin's performance was average due to its business model [1][4][5]. - **Pricing and Promotions**: High-end brands, including Estée Lauder, have increased prices annually but intensified promotional efforts, especially in duty-free channels. This has affected actual demand, leading to a gradual tightening of promotional strategies to improve profit margins [1][6][7]. - **Profit Margins**: Estée Lauder's profit margins in China are higher than the global average, but retail weakness and pandemic impacts have hindered expected improvements. The company aims for healthier growth and increased profit margins moving forward [1][7]. - **8T Strategy**: The new CEO's 8T strategy focuses on stabilization and cost efficiency, but sustained growth remains a challenge. The brand matrix is less robust compared to L'Oréal, relying heavily on La Mer and Estée Lauder, with significant dependence on promotions in online channels [1][7][8]. Additional Important Insights - **Brand Performance**: La Mer is performing well globally, while Estée Lauder faces challenges with brand aging and customer attrition. The company needs to restore growth to offset declines in other brands [1][9][10]. - **Sales and Revenue**: In 2025, Estée Lauder's total revenue was approximately $14 billion, with Estée Lauder and La Mer accounting for 70-75% of total revenue [1][10]. - **Product Innovation Challenges**: Estée Lauder faces significant product aging issues and has been slow in innovation compared to competitors. The new CEO emphasizes product innovation as a key strategy to improve market conditions [1][16][17]. - **Market Dynamics**: The high-end skincare segment is expected to continue growing, while color cosmetics face pressure from domestic brands. The fragrance segment is slowing down, and the competitive landscape is changing rapidly [1][5][33][36]. Future Outlook - The growth of international high-end beauty brands in China over the next 2-3 years will depend on the ability to attract new customers and adapt to changing consumer preferences. High-end skincare products are expected to perform well, while entry-level products may face challenges [1][5][33]. - The online channel's expansion will not be significant, focusing instead on improving the ROI of existing e-commerce operations for sustainable growth [1][24][25]. Conclusion - The international high-end beauty market in China is recovering but faces numerous challenges, including competition from domestic brands, reliance on promotions, and the need for product innovation. Companies like Estée Lauder must navigate these dynamics carefully to achieve sustainable growth and profitability in the evolving market landscape [1][5][33][36].

Group 1 - Procter & Gamble reported mixed results for its fiscal second quarter of 2026, with adjusted earnings per share of $1.88 exceeding analyst expectations, while revenue of $22.21 billion fell slightly below consensus estimates [2] - The company adjusted its fiscal year 2026 outlook for diluted net earnings per share growth due to higher restructuring charges but maintained its guidance for core earnings per share and organic sales growth [3] - P&G has solid fundamentals, showing a lower valuation (P/OpInc) compared to Estée Lauder Companies, while demonstrating higher growth in revenue and operating income [3][4] Group 2 - The disparity between valuation and performance suggests that P&G stock may be a better investment choice than Estée Lauder stock [4] - A multi-faceted analysis is essential for assessing investments, and the Trefis High Quality Portfolio aims to mitigate stock-specific risk while providing potential upside exposure [5][7] - Evaluating the current stock price of Estée Lauder Companies in relation to its peers may indicate whether the stock is overpriced, particularly if there has been a significant reversal in its performance metrics over the past year [6]

Company Performance - Estee Lauder (EL) has gained approximately 12.6% year-to-date, outperforming the average gain of 2.4% in the Consumer Staples group [4] - The Zacks Consensus Estimate for Estee Lauder's full-year earnings has increased by 5.3% over the past 90 days, indicating improved analyst sentiment and a stronger earnings outlook [3] Industry Comparison - Estee Lauder belongs to the Cosmetics industry, which has an average gain of 20.4% this year, indicating that EL is slightly underperforming its industry [5] - National Vision (EYE), another stock in the Consumer Staples sector, has returned 5.4% year-to-date, showcasing its outperformance relative to the sector [4] Sector Ranking - Estee Lauder is ranked 14 in the Zacks Sector Rank among 180 companies in the Consumer Staples group [2] - The Zacks Rank for Estee Lauder is currently 1 (Strong Buy), reflecting its potential to outperform the market in the near term [3]

Core Viewpoint - Estee Lauder is facing a lawsuit from a startup that claims the cosmetics company has harmed its business by allegedly stealing technology to enhance sales from affluent travelers [1] Group 1 - The startup describes itself as "disruptive" and accuses Estee Lauder of effectively putting it out of business [1] - The lawsuit highlights concerns regarding intellectual property theft and competitive practices within the cosmetics industry [1]

Core Insights - Estee Lauder Companies Inc. has seen a recovery in its skin care business, with first-quarter fiscal 2026 skin care sales increasing by 3% to $1,575 million, marking a turnaround from previous declines and contributing to overall sales growth [1][9] Sales Performance - The improvement in sales was primarily driven by share gains in the U.S. and Mainland China, with Estee Lauder reporting an 8% retail growth in the U.S. skin care market, outperforming the broader category's 6% growth [2][9] - Core brands La Mer and Estee Lauder benefited from a low prior-year base and a recovery in Asia travel retail, supporting the overall sales growth during the quarter [1] Profitability - Skin care operating income rose significantly, increasing by 60% year over year, attributed to higher sales and operational efficiencies from the Profit Recovery and Growth Plan [4][9] Strategic Initiatives - The company's "Beauty Reimagined" strategy has played a crucial role in supporting results, with new product launches in high-growth areas such as longevity-focused products and acne treatments, as well as expanded distribution through platforms like Amazon in Mexico and TikTok Shop [3] Market Challenges - Despite the positive results, challenges remain, particularly in global travel retail, which is described as a volatile channel, and consumer sentiment in Mainland China, which, while improving, is still below historical peaks [5] Competitor Landscape - Coty Inc. continues to face pressure in its skin care segment, reporting declines in prestige makeup and skincare sales, while e.l.f. Beauty is expanding its skin care presence, positioning it as a key growth driver with strong consumer engagement [6][7] Valuation and Estimates - Estee Lauder shares have gained 6.5% in the past month, outperforming the industry growth of 6% [8] - The company trades at a forward price-to-earnings ratio of 44.45X, higher than the industry average of 30.35X [10] - Zacks Consensus Estimate for Estee Lauder's fiscal 2026 and 2027 earnings has increased slightly, indicating positive market sentiment [11]