Please ensure Javascript is enabled for purposes of website accessibility

Why Estee Lauder Shares Surged Today

By Jeremy Bowman – Updated Aug 19, 2019 at 6:24PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the cosmetics company jumped on a strong fourth-quarter earnings report.

What happened

Shares of Estee Lauder (EL -1.57%) were looking stunning today after the cosmetics giant turned in another strong earnings report, beating strong guidance for fiscal 2020, after wrapping up the fiscal 2019 year.

Estee Lauder stock finished the day up 12.5%.

The tips of dozens of different-colored lipsticks.

Image source: Getty Images.

So what

The strong fourth-quarter results were just the latest in a long streak for Estee Lauder, which appears to be capitalizing on growth in Asia, the popularity of cosmetics in the age of Instagram, and increasing demand for skin care products. After today's gains, the stock is up 55% year to date, an impressive run for a mature consumer goods giant.

Today, the company showed off 9% revenue growth in the fourth quarter, or 12% adjusting for currency exchange and the new accounting standards, to $3.59 billion, better than estimates at $3.53 billion.

China was again a growth engine for the company, as it's been for several cosmetics makers, and sales in the Asia-Pacific jumped 25% in adjusted terms, driven by China. Europe, the Middle East, and Africa also delivered strong results with adjusted sales rising 18%. In the Americas, however, revenue fell 5% due in part to the challenges brick-and-mortar retailers are facing.

In terms of product category, skin care was a standout performer for the parent of brands including MAC and Tom Ford as adjusted sales rose 18%. The segment also passed makeup as the company's biggest last year, bringing in $6.6 billion in revenue.

Adjusted earnings per share rose from $0.61 to $0.64, easily beating estimates at $0.53.

CEO Fabrizio Freda said, "Fiscal 2019 was an outstanding year for our Company. We achieved strong net sales gains across our business, fueled by investments in our strategic priorities, including improved data analytics that helped power our innovation and digital marketing. Our winning strategy led to continued share gains in global prestige beauty."

Now what

Looking ahead, Estee Lauder also gave impressive guidance for fiscal 2020. Management called for revenue growth of 7% to 8% and adjusted earnings per share of $5.90 to $5.98, up from $5.34 last year.

Though Estee Lauder stock looks pricey according to conventional metrics after today's jump, the prestige beauty company is benefiting from a number of secular trends that should continue to drive growth over the foreseeable future.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Estee Lauder Companies Inc. Stock Quote
The Estee Lauder Companies Inc.
$215.90 (-1.57%) $-3.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.