Estée Lauder(US:EL) Zhi Tong Cai Jing·2025-08-21 07:07Core Viewpoint - Estée Lauder (EL.US) experienced a decline in performance for the fiscal year 2025, with net sales down approximately 8% year-over-year, and Q4 sales at about $3.41 billion, a 12% decrease, although better than market expectations [1][2] Financial Performance - The company's adjusted gross margin for Q4 was 71.9%, slightly up by 10 basis points year-over-year, driven by price increases, product mix optimization, and cost savings [1] - Sales and management expenses were slightly above expectations, accounting for a year-over-year increase of approximately 0.6 percentage points of net sales, leading to an operating profit of $137 million, exceeding market expectations of $116 million [2] - Adjusted earnings per share (EPS) were $0.09, slightly above analyst expectations of $0.07-$0.08, but significantly down from $0.64 in the same period last year [2] Future Guidance - For fiscal year 2026, the company provided cautious guidance, expecting organic net sales growth between 0% to +3% and reported net sales growth of +2% to +5%, aligning with market consensus [3] - The EPS guidance for 2026 is set at $1.90 to $2.10, indicating a potential year-over-year growth of 26% to 39%, but below Wall Street's previous consensus of approximately $2.1 to $2.20 [3] - The company anticipates an effective tax rate of about 36% for fiscal year 2026, significantly higher than the market's prior estimate of around 32%, which may lower the EPS guidance by approximately $0.14 [3] Market Sentiment - Morgan Stanley reiterated a "neutral" rating on Estée Lauder's stock, projecting a target price of $66, suggesting a potential decline of over 20% in the stock price over the next 12 months [1][4] - The cautious outlook from the new CEO and the expectation of low single-digit sales decline for Q1 2026 reflect management's alignment with market expectations [4] - The company expects high single-digit growth in travel retail channels and a return to stable growth in the Chinese market, but anticipates declines in other regions to moderate [4] Valuation Considerations - Morgan Stanley employs a lower valuation multiple due to the current pressure on the company's earnings base and net sales, alongside uncertainties regarding the "Beauty Reimagined" transformation plan and the impact of tariffs [5] - The firm maintains a cautious stance on Estée Lauder's performance outlook, highlighting risks from weak demand in China and North America, potential loss of market share, and intense price competition from European and Chinese rivals [5]