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The Estee Lauder Companies Inc Class A - Stock Quote EL

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Morningstar's The Estee Lauder Companies Inc Class A Stock Analysis

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Lowered Guidance Provides Favorable Price to Buy Estee Lauder as Headwinds Should Be Transitory

Analyst Note

| Rebecca Scheuneman, CFA |

Estee Lauder shares are down 5% as the firm reduced fourth-quarter guidance in conjunction with its March-ended fiscal third-quarter results. China imposed lockdowns in some of its largest cities in mid-March to curb the spread of COVID-19, which is inhibiting demand for beauty products in brick-and-mortar and travel channels, although online demand remains strong. Estee’s distribution facilities are in Shanghai, where restrictions are severe, limiting its ability to fill orders. Thus, we plan to lower our fourth-quarter Asia-Pacific sales estimate to a 28% decline from 11% growth previously, taking consolidated fourth-quarter organic sales to a 4% drop from 14% growth. But we think China will ease restrictions in coming weeks, as COVID cases have been declining, and Estee’s sales should recover briskly, as the weakness seems be driven more by supply constraints than weak demand. Therefore, we do not plan to revise our $280 fair value estimate materially. We think the stock weakness provides a rare opportunity for investors to buy this high-quality, wide-moat name.

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The Estee Lauder Companies Inc Class A's Company Profile

Business Description

Estee Lauder is the world leader in the global prestige beauty market, participating across skincare (59% of fiscal 2021 sales), makeup (26%), fragrance (12%), and haircare (3%) categories, with popular brands such as Estee Lauder, Clinique, MAC, La Mer, Jo Malone, Aveda, Bobbi Brown, Too Faced, Origins, Dr. Jart+, and The Ordinary. The firm operates in 150 countries, with 23% of fiscal 2021 revenue stemming from the Americas, 43% from Europe, the Middle East and Africa, and 34% from Asia-Pacific. The company sells its products through department stores, travel retail, multibrand specialty beauty stores, brand-dedicated freestanding stores, e-commerce, salons/spas, and perfumeries.

767 Fifth Avenue
New York, NY, 10153
T +1 212 572-4200
Sector Consumer Defensive
Industry Household & Personal Products
Most Recent Earnings Mar 31, 2022
Fiscal Year End Jun 30, 2022
Stock Type Classic Growth
Employees 62,000

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