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Estee Lauder Q4 Earnings Preview: What Could Happen to the Personal Products Major?

August 14, 2014 | About:
ICRAOnline

ICRAOnline

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The Estée Lauder Companies (EL), the New York-based skincare product manufacturer set to declare its fourth-quarter and full-year 2014 earnings results on August 15. As the company has posted decent growth figures in the last two quarters, the annual results could go in favor of Estée Lauder. Let’s explore the forthcoming results further.

Revenues could possibly go up

Analysts expect Estée Lauder to generate revenues of $2.66 billion in the fourth quarter, an impressive 10.30% growth from $2.41 billion in the same quarter last year. With the predicted quarterly growth rate already exceeding the full-year outlook of 7%, the company seems to be heading in the right direction.

According to estimates, its full year top line could reach $10.90 billion from $10.18 billion posted in the previous year, as the company’s sales have improved in the last two quarters. Top line went up 3% in the second quarter of the fiscal year while the third quarter saw a rise of 6% from last year’s corresponding quarter, as reported by Forbes.

Higher international sales could also help the company to meet its full-year growth target. Estée Lauder generates more than 60% of its revenues from international sales, and it’s continuously spreading out across the world. International sales have experienced an average of over 10% yearly growth in the last five years and could soar even higher with market share gains in the Asia-Pacific and EMEA regions. Growth in the Asia-Pacific market is expected to come on the back of massive demand for skincare products, as it’s estimated to post revenues of $12 billion from skincare product sales alone between 2012 and 2017.

Latin America, being the world’s largest consumer of fragrance products, is a significant contributor to the company’s fragrance product segment sales. Also, with a huge market for makeup products, the continent, including economies such as Brazil, Uruguay, Mexico and Argentina, has a growing demand for nail products and BB creams. Estée Lauder’s makeup products are so popular in the region that the segment has witnessed an annual rise of 6% since 2007. As these economies stabilize further, consumer spending in personal products could see further improvement, helping the company’s revenues boost up further.

Earnings expected to rise

Even though the U.S. economy is in a recovery mode, the personal products industry hasn’t found an encouraging number of customers in recent times, as is evident from L’Oreal (LRLCY) missing analysts’ second quarter revenue guidance. Despite the situation, Estée Lauder’s expected to increase earnings to $0.56 a share in the fourth quarter, vis-à-vis $0.24 a share in the corresponding quarter last year. Sequentially, the company’s bottom line is likely to grow by a cent.

Not only does Estée Lauder’s fourth-quarter earnings prospect seem positive, its bottom line for the fiscal year could also grow to $3.06 per share as against $2.64 a share in the last year.

Last thoughts

Rising demand for skincare and makeup products in myriad regions of the world bodes well for Estée Lauder. Its fourth-quarter earnings could top analysts’ expectations, painting a bright future for the company. Let’s keep an eye on the results and hope for a positive ending to the fiscal year.


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