Estée Lauder Companies Inc (EL) recently released its fiscal Q2 2024 earnings report, reflecting a challenging period for the company. With a 2% decrease in net sales and a significant 61% drop in diluted EPS, the company’s performance has raised concerns among investors. 

Key Insights from Estée Lauder Companies Q2 Reports: 

• Net Sales Decline: Estée Lauder reported net sales of $15.61 billion for fiscal Q2 2024, a 2% decrease from the previous year.
• Key Market Challenges: The decline was primarily due to ongoing softness in the prestige beauty market in mainland China and a drop in Asia travel retail.
• Significant EPS Drop: Diluted earnings per share (EPS) fell by 61% to $1.08, indicating significant struggles in key markets.
• Organic Sales Performance: Organic net sales decreased by 2%, but they returned to growth in the second half of the fiscal year.
• Adjusted EPS Outlook Exceeded: Despite challenges, the company exceeded its adjusted diluted EPS outlook, which declined by 25% to $2.59.
• Slightly Better Full-Year Performance: Full-year adjusted operating margin and adjusted diluted EPS were slightly better than anticipated.

Stock Target Advisor’s Analysis on Estée Lauder Companies: 

Stock Target Advisor’s analysis presents a “Very Bearish” outlook for Estée Lauder Companies Inc., based on several negative indicators. The company is currently delivering poor risk-adjusted returns compared to its peers, and its total returns have been volatile. Over the past year, Estée Lauder’s stock price has dropped by a staggering 71.14%, reflecting its underperformance relative to its sector.

Several factors contribute to this bearish outlook, including low earnings and revenue growth over the past five years, high volatility in stock returns, and below-median dividend returns. The company’s stock has been rated as “Buy” by some analysts, with an average target price of $142.03, but the general sentiment remains cautious given the current market conditions.

Conclusion: 

Estée Lauder’s Q2 2024 earnings report highlighted the ongoing challenges the company faces, particularly in China and Asia-Pacific. Investors should remain cautious and closely monitor the company’s progress in addressing these challenges while capitalizing on opportunities in other markets.