Why Estee Lauder Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Estee Lauder (NYSE: EL  ) were looking stunning today, gaining as much as 11% after delivering an attractive earnings report.

So what: Despite overall retail weakness in the second quarter, luxury purveyors seemed to buck the overall trend. The cosmetics king beat estimates on the top and bottom lines, posting a 9% sales increase and 25% improvement in net income. Management cited strong growth in the U.S. and China, as well as travel retail, and said sales grew twice as fast as the overall industry's, which they attributed to "innovative products, marketing prowess, and personalized services."

Now what: Along with Michael Kors (NYSE: KORS  ) , which also blew away expectations, Estee Lauder's performance may confirm that the consumer hourglass theory -- that luxury and low-end brands are prospering in this economy -- is still in effect. Also notable was the company's resistance to the European recession as sales in its Europe, Middle East, and Africa still grew by 11% for the quarter. As a strong brand with appealing growth opportunities, Estee Lauder can't help delighting investors with a report like this in an otherwise weak economy.

Want to keep an eye an Estee Lauder? Just add Estee Lauder to your Watchlist.

Fool contributor Jeremy Bowman holds no positions in the companies in this article. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 14, 2012, at 5:32 PM, JAVKO wrote:

    Market is supposed to be forward looking, isn't it?

    So despite Co's outlook on EPS for next Q and FY being lower than consensus, it goes up.

    Explain that and provide other examples of similar cases where PPS has risen 10% despite lower outlook.

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