What Happened?
Shares of beauty products company Estée Lauder (NYSE: EL) fell 18.2% in the morning session after the company reported underwhelming fourth-quarter results. Its EBITDA missed significantly, and its EPS guidance for next quarter fell short of Wall Street's estimates. On the other hand, Estée Lauder blew past analysts' EPS expectations this quarter. While revenue also beat analysts' estimates, sales declined year on year. The company unveiled "Beauty Reimagined," a plan to boost sales and profits by cutting costs, speeding up product launches, and expanding into fast-growing markets. As part of its cost optimization efforts, the company plans to eliminate 5,800 to 7,000 jobs. Overall, this was a difficult quarter.
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What The Market Is Telling Us
Estée Lauder’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. Moves this big are rare for Estée Lauder and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 22.3% on the news that the company reported weak quarter earnings. Estée Lauder's organic revenue missed Wall Street's estimate, although revenue was in line. Next quarter's revenue and EPS guidance were both below. Add to the bad news: the company is reducing its dividends. Lastly, management called out "worsened consumer sentiment in China that drove further softening in overall prestige beauty in mainland China and low conversion rates in Asia travel retail and Hong Kong SAR" Overall, this was a bad quarter.
Estée Lauder is down 6.7% since the beginning of the year, and at $68.99 per share, it is trading 56.3% below its 52-week high of $157.94 from March 2024. Investors who bought $1,000 worth of Estée Lauder’s shares 5 years ago would now be looking at an investment worth $344.23.
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