Well before market open on Monday, Estée Lauder Companies (EL 4.84%) stock received a boost without the company even trying. An analyst upgraded his recommendation on the storied cosmetics company, and investors greeted the news by boosting its share price by nearly 5%. This was more than quintuple the percentage rate gain of the S&P 500 index on the day.
Leaping from neutral to buy
The analyst doing the upgrading was Steve Powers from veteran international lender Deutsche Bank. Powers has had a change of view on Estée Lauder, as he modified his recommendation to buy from his previous hold. His price target is $95 per share, quite a change from his preceding $71 level.
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The pundit's new outlook on the company hinges on its international growth strategy. According to reports, Powers believes that there is mounting evidence that management's goal of boosting overseas sales in markets besides China is working.
Meanwhile, the analyst gave Estée Lauder good marks for innovating its product lineup and wrote that its considerable investment requirements -- mainly in areas such as supply chain management -- have already been made, carving out a path for robust profitability growth.
The challenge of being an incumbent
It isn't easy to lift either sales or profitability if you're a well-established company in your field, and Estée Lauder has been struggling with this for some time. Yet I'd agree with Powers that its current management team seems to be sensible and engaged, and pulling the right levers for growth. This isn't a stock that excites me all that much, but perhaps something of a growth spurt is happening.
