e.l.f. Beauty Will Maintain Growth Momentum Despite Tailwinds - This Analyst Upgrades Stock Ahead Of Q2

Raymond James analyst Olivia Tong revised ratings on a few U.S. beauty, personal care & household products companies ahead of their Q3 FY23 results.  

In Q3, the analyst expects quality to be more mixed vs. H1 FY23 on pricing laps, consumer ability to remain resilient, underwhelming recovery in China, higher marketing spending, and foreign currency translation headwinds.  

Nevertheless, the analyst sees strong emerging markets, better-than-expected European operations, lower input cost pressures, and higher brand support as tailwinds.

The analyst notes that the Beauty/Beauty Retail, HPC, and Home Goods sectors (especially Beauty) have underperformed the market on concerns related to growth sustainability.

Consequently, Tong upgraded e.l.f. Beauty Inc ELF to Strong Buy from Outperform at a lowered price target of $140 from $145. The analyst expects the company to maintain growth momentum well ahead of its peers thanks to strong innovation (mostly in new categories), differentiated effective marketing, and accessible price points. 

The analyst raised EPS estimates to $2.56 (from $2.50) vs. $2.44 street view for FY23 and $2.88 (from $2.78) vs. consensus $2.85 for FY24.

ELF will report second quarter fiscal 2024 results on November 1, 2023.

On the other hand, the analyst downgraded Newell Brands Inc NWL to Outperform from Strong Buy and cut the price target to $10 from $13. 

Tong is bearish on the lowered FY outlook last quarter, Icahn Enterprises LP IEP leaving the board and challenging sales recovery as student loan repayments resume, and retailers aiming to exit the year-end with cleaner inventory positions.

Nevertheless, the analyst expects a material improvement in H2 vs H1 led by recent cost-cutting and portfolio initiatives.

The analyst lowered EPS estimates to $1.10 (from $1.15) vs. consensus $1.08 for FY24 while maintaining $0.82 vs. street view $0.84 for FY23. 

NWL is expected to report Q3 FY23 earnings results on October 27, 2023.

Price Action: ELF shares are up 4.15% at $106.11, while NWL shares are down 1.65% at $6.86 on the last check Monday.