Why Are Cosmetics Major Estee Lauder's Shares Diving Today?

Estee Lauder Companies Inc EL shares are trading lower after the company issued its third-quarter FY24 results. 

The company reported a third-quarter sales growth of 5% year-on-year to $3.94 billion, beating the analyst consensus estimate of $3.913 billion.

Organic net sales increased 6%, primarily due to double-digit growth in Europe, the Middle East & Africa, driven by stronger sales in Asia travel retail.

Net sales in the Americas improved 3%. Sales in Europe, Middle East & Africa climbed 12%, and Asia/Pacific fell 1%.

Net sales from Skin Care grew 8%, Makeup increased 3%, Fragrance remained flat, and Hair Care decreased 3%.

Adjusted EPS of $0.97 beat the analyst consensus estimate of $0.49.

Gross profit increased 9% Y/Y to $2.83 billion, with the margin expanding 280 basis points to 71.9%.

Operating expenses remained flat at  $2.3 billion, while the operating expense margin was 58.4% versus 61.2% last year.

Estee Lauder’s operating income for the quarter was $531 million, a 79% jump from $297 million last year. The operating margin was 13.5% versus 7.9% a year ago.

The company held $3.7 billion in cash and equivalents as of March-end.

The company will pay a quarterly dividend of $0.66 per share on the Company’s Class A and Class B Common Stock on June 17 to stockholders of record on May 31.

Outlook: Estee Lauder revised FY24 adjusted EPS outlook to $2.14-$2.24 (from $2.08-$2.23) against the consensus of $2.25.

EL also revised FY24 reported sales outlook to 3% decline – 2% decline (from previously expected decrease of 1% – increase of 1%).

For the fourth quarter, Estee Lauder expects adjusted EPS of $0.18-$0.28 against the consensus of $0.76. The company sees reported net sales growth of 5%-9% and organic net sales increase of 6%-10%.

Price Action: EL shares traded lower by 4.57% at $140.01 at premarket Wednesday.

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