Estée Lauder: Beauty Stock On Sale After 26% Fall Since January

(Preview) Company Update (EL US) (Buy)

Summary

• EL shares have fallen 26% since their peak in early January, the result of wider market turmoil following the Russian invasion of Ukraine.

• While EL has suspended all commercial activity in Russia, its exposure to the country is just slightly over 1% of total revenues.

• Operational performance has continued to be strong, with organic sales growth at 14% last quarter and guided to be 10-13% for FY22.

• All regions and segments had good growth in Q2; we expect long-term EPS growth to be low-teens, from sales growth and margin uplift.

• With shares at $277.68, we expect an exit price of $440 and a total return of 62% (16.0% annualized) by June 2025. Buy.

Introduction

We review our investment case in The Estée Lauder Companies Inc. after its shares have fallen 26% since their peak in early January.

We initiated our Buy rating on Estée Lauder in early April 2020. EL shares are now down 2.7% over the past year, though still having gained 72% (including dividends) since our initiation.

We believe E…