Estée Lauder stock experienced a decline in premarket trading following the company's announcement of weaker-than-expected guidance, despite surpassing expectations.
Weaker Forecast for 2024
Estée Lauder (ticker: EL) revealed that its adjusted earnings per share for the year ending June 2024 are projected to range between $3.50 and $3.75, falling below consensus estimates of $4.88. Furthermore, the company expects sales to increase by 5% to 7%.
As a result of the disappointing forecast, shares of Estée Lauder dropped by 5% to $154 in premarket trading. This decline adds to the stock's overall decrease of nearly 35% this year.
Challenging First Quarter Expected
Estée Lauder anticipates an adjusted loss of between 29 and 19 cents per share in the first quarter, contrasting with projections for earnings of 98 cents per share.
CEO Fabrizio Freda is optimistic about the future, stating, "For fiscal year 2024, we expect to return to organic sales growth and deliver sequentially improving margin throughout the year, leveraging the strong equity and desirability of our brands. We are focused on driving momentum in markets that are thriving and re-accelerating growth in North America."
Strong Fourth Quarter Performance
In the recent fourth quarter, Estée Lauder reported net sales of $3.61 billion, surpassing Wall Street's forecast of $3.49 billion. The company's travel retail business in Asia played a significant role in exceeding sales expectations as pandemic-era restrictions eased.
Additionally, Estée Lauder's adjusted earnings per share of 7 cents outperformed projections for a four cent loss, according to FactSet estimates.
Stifel analyst Mark Astrachan believes that investors' perception of the initial guidance will greatly impact Estée Lauder's stock performance. However, he acknowledges the challenges ahead.
"Travel retail is expected to remain pressured as bloated channel inventories are reduced, weighing on overall sales growth," Astrachan noted in a client note. "Additionally, U.S. weakness is notable given volatility in the market in recent years, with significant share loss and no quick fix likely, in our view."
Astrachan maintains a Buy rating on the stock.