On Monday, Citi reaffirmed its Buy rating and $110.00 stock price target for Estee Lauder (NYSE:EL), despite the company's announcement of lower-than-expected long-term earnings guidance and the upcoming retirement of CEO Fabrizio Freda by the end of fiscal year 2025. Estee Lauder's guidance for fiscal year 2025 earnings per share (EPS) is set at $2.75-$2.95, which falls short of the roughly $3.60 anticipated by investors.
The company's fourth-quarter adjusted EPS for fiscal 2024 outperformed expectations, coming in at $0.64 compared to the guidance range of $0.18-$0.28, and surpassing both Citi's estimate of $0.26 and the consensus estimate of $0.26. Estee Lauder also reported an 8% organic sales growth (OSG), which exceeded Citi's 6% projection and the consensus prediction of 6.8%.
Estee Lauder's current CEO, Fabrizio Freda, is slated to retire by the end of FY25, prompting the Board to begin the search for a successor, considering both internal and external candidates. This announcement comes in conjunction with the company's financial guidance.
Despite these developments, Citi anticipates that Estee Lauder's stock will experience a significant decline today, with the softer guidance being only somewhat mitigated by the news of the CEO transition. A conference call is scheduled for today at 9:30 am ET to discuss these updates further.
In other recent news, Estée Lauder Companies Inc. has announced a quarterly dividend of 66 cents per share, highlighting its commitment to shareholder value. The beauty industry giant also revealed plans for CEO Fabrizio Freda's retirement at the end of fiscal year 2025, with the board actively searching for a successor.
In financial developments, Estée Lauder's fourth-quarter sales growth is expected to be +4.4%, a downgrade from the previous +7.7% estimate. Canaccord Genuity maintained its Hold rating on Estée Lauder but reduced the price target to $100.
However, BofA Securities downgraded Estée Lauder from Buy to Neutral due to concerns over weaker-than-anticipated performance in the beauty sector within China. These are the recent developments shaping Estée Lauder's position in the industry.
InvestingPro Insights
As Estee Lauder (NYSE:EL) navigates through its leadership transition and forecasts lower-than-expected earnings guidance, investors may find value in examining some key metrics and insights from InvestingPro. The company's market capitalization stands at $34.05 billion, and despite a challenging period, it has displayed resilience with a significant return over the last week. Estee Lauder's gross profit margin remains impressive at 70.77%, highlighting the company's ability to maintain profitability in its operations.
InvestingPro Tips suggest that Estee Lauder has raised its dividend for three consecutive years, which may appeal to income-focused investors, especially with a current dividend yield of 2.78%. Moreover, the company's liquid assets exceed its short-term obligations, indicating a strong liquidity position. Investors should note that while Estee Lauder is trading at a high earnings multiple with a P/E ratio of 53.12, the company has maintained dividend payments for 29 consecutive years, underscoring a commitment to shareholder returns.
For those seeking a deeper analysis, InvestingPro offers additional tips on Estee Lauder, providing a more comprehensive understanding of the company's financial health and market position. The full suite of InvestingPro Tips can be accessed for further investment strategies and insights.
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