Why This Estee Lauder Analyst Is No Longer Bullish Ahead Of Earnings

Analysts expect Estee Lauder Companies Inc (NYSE:EL) to announce earnings per share of 27 cents on $3.83 billion in revenue when fourth-quarter financials are released Monday before the market opens.

In a recent note, Bank of America‘s Bryan D. Spillane downgraded the stock from Buy to Neutral. He also slashed the target price from $140 to $100 citing muted growth expectations.

Estee Lauder faces headwinds in its profit recovery due to weaker-than-expected performance in China. The Chinese beauty market historically contributes about a third of its sales, Spillane said.

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Estee Lauder’s recovery strategy aims to stabilize demand in China and improve U.S. market share, but has been challenged by a deceleration in China since March and softening U.S. demand.

Consequently, profit recovery timing is uncertain, especially given the need for potential increased marketing amidst slowing demand.

As a result, Spillane reduced the fiscal 2025 EPS expectations from $3.95 to $3.55.

Spillane’s valuationrepresents a slight discount to the S&P Household and Personal Care Index.

Downside risks include continued weakness in developed markets, slower growth in key channels, higher brand investment needs, and economic factors like a potential recession or prolonged COVID-19 impact, he said.

Conversely, upside risks include a quicker recovery in the makeup segment, particularly in the U.S., a faster return to global travel and rising middle-class consumption in emerging markets.

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