An analyst sees good growth prospects for The Estee Lauder Companies Inc. (EL)

The Estee Lauder Companies Inc. (NYSE: EL) stock fell -0.68% on Friday to $237.86 against a previous-day closing price of $239.50. With 1.27 million shares changed hands, the volume of the stock remained heavier than its average volume of 1.24 million shares. During the session, the Household & Personal Products company that operates in wider Consumer Defensive sector, reached to the highest price of $247.43 whereas the lowest price it dropped to was $237.86. The 52-week range on EL shows that it touched its highest point at $374.20 and its lowest point at $225.39 during that stretch. It currently has a 1-year price target of $309.70. With its current market cap of 86.81 billion, EL has annualized dividend of $2.40 while the current yield stands at 1.01%. Beta for the stock currently stands at 0.99.

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Price Performance and Earnings:

Stock performance is one of the indicators that investors use to determine whether they will profit from a stock. The price performance of EL was down-trending over the past week, with a drop of -3.36%, but this was down by -10.33% over a month. Three-month performance dropped to -4.05% while six-month performance fell -15.62%. The stock lost -23.66% in the past year, while it has lost -35.75% so far this year. A look at the trailing 12-month EPS for EL yields 6.53 with Next year EPS estimates of 8.63. For the next quarter, that number is 1.33. This implies an EPS growth rate of -16.00% for this year and 14.63% for next year. EPS is expected to grow by 10.88% annually over the next five years; however, over the past five years, the company experienced an annual growth rate of 14.40%.

Float and Shares Shorts:

At present, 357.90 million EL shares are outstanding with a float of 229.50 million shares on hand for trading. On Aug 30, 2022, short shares totaled 3.53 million, which was 0.99% higher than short shares on Jul 28, 2022. In addition to Mr. William P. Lauder as the firm’s Exec. Chairman, Mr. Fabrizio Freda serves as its Pres, CEO & Director.

Institutional Ownership:

Through their ownership of 91.88% of EL’s outstanding shares, institutional investors have majority control over the company. Other institutions hold 52.25% of EL, in contrast to 39.40% held by mutual funds. Shares owned by individuals account for 2.24%. As the largest shareholder in EL with 7.33% of the stake, The Vanguard Group, Inc. holds 16,968,529 shares worth 16,968,529. A second-largest stockholder of EL, BlackRock Fund Advisors, holds 10,550,961 shares, controlling over 4.56% of the firm’s shares. SSgA Funds Management, Inc. is the third largest shareholder in EL, holding 9,795,053 shares or 4.23% stake. With a 2.67% stake in EL, the Vanguard Total Stock Market Index is the largest stakeholder. A total of 6,176,455 shares are owned by the mutual fund manager. The Fundsmith Equity Fund, which owns about 2.31% of EL stock, is the second-largest Mutual Fund holder. It holds 5,346,924 shares valued at 1.36 billion. Vanguard 500 Index Fund holds 2.24% of the stake in EL, owning 5,173,281 shares worth 1.32 billion.

An Overview of Recent Financials:

Understanding a company as a customer does not mean you will understand it as an investor. The wise investor uses quantitative research to analyze metrics such as revenue, net income, and earnings. In its fiscal quarter reported on Jun 29, 2022, EL reported revenue of $3.56B and operating income of $196.00M. Over the past year, revenue came in at $17.74B while operating income stood at $3.17B. It generated $52.00M net income for the quarter, which came to $2.39B over the last twelve months. The EBITDA in the recently reported quarter was $388.00M and diluted EPS was $0.14. EBITDA for the full year was $4.30B.

Analysts Ratings:

Reading analyst opinions is an effective way to decide where to invest, and there are several opinions available for EL since 27 analysts follow the stock currently. There are 16 analysts who recommend BUY ratings, while 0 suggest SELL ratings. Of the remaining analysts, 8 believe that the stock is worth HOLDING, 3 give it an OVERWEIGHT rating, and 0 thinks that it’s UNDERWEIGHT. In the same way, a target price assigned to a stock can also reveal much about its potential. With EL analysts setting a high price target of $377.00 and a low target of $229.00, the average target price over the next 12 months is $308.42. Based on these targets, EL could surge 58.5% to reach the target high and fall by -3.72% to reach the target low. Reaching the average price target will result in a growth of 29.66% from current levels.

EPS: Estimates vs Actual

It is also common to use earnings estimates to evaluate a firm’s growth potential and to determine trading strategy. EL will report FY 2023 earnings on 08/18/2023. Analysts have provided yearly estimates in a range of $8.00 being high and $6.79 being low. For EL, this leads to a yearly average estimate of $7.51. The earnings surprise of a firm occurs when the actual results change from the consensus earnings estimate. The Estee Lauder Companies Inc. surprised analysts by $0.10 when it reported $0.42 EPS against a consensus estimate of $0.32. The surprise factor in the prior quarter was $0.23. Based on analyst estimates, the high estimate for the next quarter is $1.51 and the low estimate is $1.23. The average estimate for the next quarter is thus $1.33.

Summary of Insider Activity:

Insiders traded EL stock several times over the past three months with 2 Buys and 4 Sells. In these transactions, 134,019 shares were bought while 92,901 shares were sold. The number of buy transactions has increased to 42 while that of sell transactions has risen to 88 over the past year. The total number of shares bought during that period was 3,393,436 while 3,445,946 shares were sold.

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