What Happened?
Shares of beauty products company Estée Lauder (NYSE:EL) fell 22.3% in the afternoon session after the company reported weak quarter earnings. Estée Lauder's organic revenue missed Wall Street's estimate, although revenue was in line. Next quarter's revenue and EPS guidance were both below. Adding to the bad news: the company is reducing its dividends.
Lastly, management called out "worsened consumer sentiment in China that drove further softening in overall prestige beauty in mainland China and low conversion rates in Asia travel retail and Hong Kong SAR." Overall, this was a bad quarter.
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What The Market Is Telling Us
Estée Lauder’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. But moves this big are rare even for Estée Lauder and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 19.4% on the news that the company reported second-quarter results that blew past analysts' EPS expectations. Its operating margin also outperformed Wall Street's estimates.
On the other hand, its earnings forecast for the next quarter missed analysts' expectations, and its full-year earnings guidance missed Wall Street's estimates.
The company did provide some silver lining, though, projecting a "return to double-digit organic net sales growth in the second half of fiscal 2024."
In addition, Estee Lauder announced a restructuring plan as part of its profit recovery efforts, which will result in a 3-5% headcount reduction. Overall, this quarter's results still seemed fairly positive given that outlook for a topline recovery.
Estée Lauder is down 53.1% since the beginning of the year, and at $68.20 per share, it is trading 56.8% below its 52-week high of $157.94 from March 2024. Investors who bought $1,000 worth of Estée Lauder’s shares 5 years ago would now be looking at an investment worth $366.14.
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