COTY - Estee Lauder shares fall after Goldman says China sales falling short
2023-07-18 10:53:58 ET
The Estée Lauder Companies Inc. ( NYSE: EL ) slid 1.7% on Tuesday after Goldman Sachs said China beauty sales are falling short.
“Results from China Tourism Group Duty Free and takeaways from an expert call held by one of our colleagues both suggest that beauty sales in Hainan are falling short of our prior expectations,” Goldman Sachs analysts led by Jason English wrote in a note. “The weakness is being attributed to tighter restrictions on Daigou resellers by the government.”
Destocking is now expected to be a longer headwind for EL than initially contemplated, and it will likely have a negative mix impact on EL’s share, weighing further on sales. It may also force EL to invest further in the market, Goldman said.
“We lower our FY24 and FY25 estimates meaningfully in consideration of this dynamic,” Goldman said, though it maintained its Buy rating as EL is “a structurally growth advantaged HPC company over the long term.”
Compelling recovery is expected for the latter half of 2024.
Warning
Last week, Citi issued a warning on the near-term share price path for EL due to concerns ahead of the earnings report due out in late August.
"We expect below consensus initial FY'24 guidance. While that is somewhat anticipated by the market, we don’t believe investors will view low guidance as conservative given large cuts over the last two years."
Goldman lowered FY23/FY24/FY25 EPS estimates to $3.30/$4.56/$6.80 from $3.38/$5.95/$8.52, respectively. The firm introduced an FY26 EPS estimate of $7.65, assuming Hainan sales remain under meaningful pressure through 1H24 before returning to sharp growth.
EL peers including e.l.f. Beauty, Inc. ( ELF ), Coty ( COTY ) and Unilever PLC ( UL ) were little changed on Tuesday.
EPS estimates for the upcoming quarter have been revised lower 23 times over the past three months, and not once have they gone higher.
Shares of EL are down about 26% year-to-date, and the stock has 14 Strong Buy ratings from Wall Street analysts, seven Buys, eight Holds and one Strong Sell.
More on EL:
- Estee Lauder Stock: Well-Positioned For Long-Term Growth
- Estee Lauder: Asia Travel Retail Recovery Is On The Way
- Estee Lauder stock rises as company teases anti-aging research
- Estée Lauder falls after Oppenheimer turns cautious on near-term setup
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Estee Lauder shares fall after Goldman says China sales falling short