Investors reacted negatively to Estee Lauder’s fiscal fourth-quarter outlook, despite the company’s strong third-quarter performance. Revenue grew 5% year-over-year to $3.94 billion, exceeding analyst expectations of $3.91 billion. Adjusted earnings per share more than doubled to 97 cents, well ahead of the 49-cent estimate. However, the company’s forecast for the fourth quarter fell short of expectations, with sales expected to increase by 5% to 9% and adjusted earnings per share projected to be in the range of 19 cents to 29 cents.
Despite the weaker outlook, analysts at The Motley Fool believe that Estee Lauder’s business fundamentals are improving. The company’s skincare business, its highest-margin category, saw 9% organic growth, driven by all geographic regions. Additionally, the company’s inventory normalization efforts are making progress, and it expects to continue to drive margin expansion through improved product mix, increased supply chain efficiencies, and higher price realization.
Analysts at The Motley Fool believe that Estee Lauder’s Profit Recovery Plan is on track and should lead to continued earnings growth in fiscal 2025 and beyond. They maintain their 1 rating and $162 price target for the stock, but they are not recommending buying more shares at this time due to the stock’s volatility and elevated risk. Overall, while the market reaction to Estee Lauder’s fourth-quarter outlook was negative, analysts remain optimistic about the company’s long-term prospects and believe that the stock’s recent decline is overdone.
