RBC Capital Markets analyst Nik Modi reiterated Outperform rating on Estee Lauder Companies, Inc.
(NYSE: EL), lowering the price target to $195 from $265.
EL will release its fiscal 2023 fourth quarter and full-year results on August 18, 2023.
Modi expects a solid reaction to Friday's print, but it's expected to be a close call in which direction.
The analyst flags that data points have skewed negatively for EL (especially China), with shallow buy-side sentiment. Travel Retail in China continues to be a headwind with its own dynamics at play.
Estee's guidance cut last quarter was enough to account for the challenges, notes the analyst.
Buy-side expectations for FY24 are well below sell-side consensus, and the analyst thinks EL can clear this hurdle ($4.10-$4.40 in EPS and 0%-2% LC sales growth).
Modi notes that Estee Lauder is losing its share in North America, which is reflected in the estimates.
The analyst adds that Asia continues to be the region of contention as performance in Mainland China/APAC and travel retail (in China) are two roads diverged.
On the positive side, the analyst notes that Mainland China is showing strong growth in beauty and across broader luxury (despite recent economic data), with solid results from top companies.
The analyst's expectations for 2024 guidance are around +0-2% top-line growth and EPS of $4.10-$4.40.
That said, Modi sees the possibility for EL to guide closer to its +6-8% topline algorithm, given FY24 will be a recovery year (partially offset by the impact of cybersecurity issues).
Price Action: EL shares are trading lower by 0.19% to $163.21 on the last checked Wednesday.