Estee Lauder Co. - Momentum

Estee Lauder Co. (EL) recently jumped to a new multi-year high after reporting an awesome Q3 earnings surprise of 26% in early November. With consistent earnings over the last four quarters and a bullish next-year estimate, this Zacks #1 rank stock has plenty of upward momentum ahead of the holidays.

Company Description

The Estee Lauder Companies, Inc., manufactures and sells various personal care products like skin care, fragrances and makeup worldwide. The company was founded in 1946 and has a market cap of $15 billion.

Although EL has been trending higher for most of the last 18 months on the back of the stronger global economy, shares took a nice jump on Nov 5 after the company reported solid Q3 results that came in ahead of expectations.

Third-Quarter Results

Revenue for the period was up 14% from last year to $1.83 billion. Earnings also looked good, coming in at 97 cents, 26% ahead of the Zacks Consensus Estimate, where the company now has an average earnings surprise of 8% over the last four quarters.

The company's solid results were driven by its skin care segment, its largest by volume, where sales were up 17% from last year to $858 million.

Estee Lauder's international business was also on the upswing during the quarter, with sales in Asia Pacific up 16% from last year to $414 million. Its other international region of Europe, the Middle East & Africa saw sales jump 13% to $681 million.

Balance Sheet Strengthening

The company also continues to work on its balance sheet, where its total debt is down $174 million from last year to $1.23 billion with cash and equivalents of $694 million.

Estimates

Estimates took a nice jump forward on the good quarter, with the current year up 16 cents to $3.22 and the next-year estimate up 17 cents to $3.72, a bullish 16% growth projection.

Valuation

In light of the recent gains, shares trade at a premium to the industry average, with a forward P/E of 24X against 16X.

2-Year Chart

On the chart, EL surged to a new multi-year high at $76.29 on the good quarter. The MACD below the chart is bullish too, with the short-term average trending ahead of the long-term average. Look for support from the longer-term trend line on any weakness, take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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