Estée Lauder: Strong FY21 Finish; Double-Digit Growth Resuming (Preview)

Company Update (EL US) (Buy)

Summary

• EL's rebound continued in Q4 FY21, with sales 10% higher than pre-COVID levels; full-year FY21 EPS was 21% higher than FY19.

• Sales recovery was led by China and Skincare already significantly surpassing 2019 levels, with plenty of potential left in other areas.

• Growth in China is supported by government efforts to encourage consumption, and was unaffected by the last anti-corruption drive.

• EL is guiding to a 13-16% EPS growth in FY22, and to the resumption of its traditional double-digit EPS growth algorithm after COVID.

• With shares at $327.40, we expect a total return of 20% by June 2024; with long-term annualized return trending to double digits. Buy.

Introduction

We review our Estée Lauder (EL) investment case after FY21 results were released on Thursday (August 19). EL shares finished the day up 2.6%.

We initiated our Buy rating on The Estée Lauder Companies Inc. in early April 2020 (PRO subscription required). Since then EL stock has doubled, including gains of 28% year-to-date a…