Written by Brenda Nakalema

Estee Lauder Stock Drops Amidst Disappointing Earnings Outlook

Estee Lauder (ticker: EL) shares traded lower on Thursday following the beauty company’s announcement that it expects fiscal first-quarter earnings …

Estee Lauder (ticker: EL) shares traded lower on Thursday following the beauty company’s announcement that it expects fiscal first-quarter earnings to fall below Wall Street estimates.

The company said it expects first-quarter earnings to fall between $1.22 a share and $1.32 a share, far below analysts’ expectations of $1.84. The company also expects net sales to drop from 10% to 8% from the previous year’s period.

Estee Lauder blamed the negative impacts brought on by the Russian invasion of Ukraine and foreign currency transactions, specifically in international markets where travel is popular.

The company posted adjusted earnings of 42 cents a share on revenue of $3.56 billion for its fiscal fourth quarter. According to FactSet analysts, the company was expected to report earnings of 33 cents a share on revenue of $3.42 billion.

“Our multiple engines of growth strategy proved invaluable amid pandemic and macro complexity, said company CEO Fabrizio Freda. Shares of the company dropped 1.4% in premarket trading, landing at $272.60. The stock has declined 25% so far this year.

Before the earnings release, RBC Capital Markets analyst Nik Modi commented on the company, saying it was “the best-managed company in our coverage” and that he was approaching quarterly estimates “with prudence given ongoing Covid-19 volatility in China.”

Modi added that he expected the results would be driven by the Americas and Europe “as the cosmetics renaissance Estee Lauder promised seems to have arrived.” He drew attention to Ulta Beauty’s (ticker: ULTA) strong results in May, with consumers displaying fresh interest in makeup after Covid lockdowns were lifted.

“The return of social use occasions has been driving cosmetics usage as restrictions in the U.S and Western Europe have lifted,” Modi said.