Estee Lauder Companies Inc. (EL) is a global manufacturer as well as a marketer of makeup, skin care, hair care products and fragrance. This company has a portfolio of over 100 products with mainly its foundation, moisturizing lotion and the fragrances driving its growth twice the industry’s performance, with a 40%-60% range in growth.
Let’s take a look at the performance
A peek at the annual sales ranging from 20009-2019 shows that there has been an increased growth in sales over time. This has been driven by the more affluent consumers of skin care products as compared to past years. The company has witnessed growth in net sales in the fiscal year 2019, especially from international growth. China and Hong Kong have accelerated this growth through the online channel.
In August 16, 2019, the company declared a dividend of $. 43 per share on both classes A and B common stock. It also expects to continue paying cash dividends in the future. The total amount of dividends paid for the FY2019 was $609 million, an increased amount from the previous FY of $546million necessitated by increased net earnings.
A look at the cumulative five-year return shows an appreciation of the stock price plus the dividends.
In the FY2019, the company had a 9% increase in net sales closing at $14.86 billion, $1.79billlion in net earnings. There was also an increase in diluted net earnings of $4.82 for every common share, an increase from the previous years’ $2.95.
EL operates in a very volatile market, and investors would be wary of investing in their stock. However, given the past statistics and growth in market share, the prospects are a bit promising. China, which is the main growth engine for the company has driven skin care product at a high level. Their target for the middle class, especially for markets in India, Middle East and also South East Asia boosted the sales.
The annual prestige beauty market in which EL is also a key player showed a growth of 7%. Globally, a sneak peek on this growth from 2014 shows there has been no decline in the annual growth in this industry, an indication that beauty products have been embraced worldwide and there are prospects for further growth.
The posted value of adjusted EPS, which showed a series of increase of 19% to $1.67 beat the $1.60 ZCE. The earnings improved due to excellent operations and vigorous top line performance. Despite concerns on the Brexit impact on costs and softness in brick and mortar retail space, EL is expecting an increased demand in 2020, given that it is implementing the leading Beauty Forward Initiative to manage both costs and operations. Since the 2020 growth of global prestige beauty industry is expected to be 5%-6%, EL is banking on this too. China’s emerging market will propel the share growth further
EL has faced a heated criticism by its 100 point reduction in its guidance in the global growth of the beauty market as a whole. However, a price target analysis on EL shows a $217.78 average target price, with a $235.00 high forecast, and $200.00 low forecast. This is a 14.03% increase from the last price of $190.99. As pertains to China’s market growth, and basing on its historical growth data, it is believed that this market share will continue to accelerate.
From its 2020 outlook, EL approximates a 5-6% on the global prestige beauty with an assumption that the geopolitical risk remains constant. Net sales are forecasted to grow by 8%-9%. There is an estimated increase in diluted net earnings per common share of between $1.83 to $1. 86. EL expects there will be growth in market share driven by increased spending for innovation, programs for the holiday season and through boosting share through increased traffic.