EL - Estée Lauder: Earnings Already Surpassed Pre-COVID Level More To Come

• Despite COVID-19, EL achieved a record EBIT in Q2 FY21 (Q4 CY20), and sales were flat organically compared with an unaffected prior year.
• The strength was primarily driven by China; the U.S., Europe, and Travel Retail were still weak, meaning there is more to come in a full recovery.
• Organic sales growth is guided to 10-11% in Q3, and management are confident of returning to their long-term growth targets after COVID.
• EL shares are trading on 42.9x pre-COVID CY19 EPS, but last quarter's EPS was already 12% higher than that in CY19.
• With shares at $285.86, we expect an exit price of $349 and a total return of 26% (7.2% annualized) in 3.5 years. Buy.

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