Estee Lauder (EL) Stock Forecast & Price Target

Estée Lauder Cos displayed a notable improvement in its financial performance, with the operating margin rising by 290 basis points to 14.4%, exceeding consensus expectations considerably, and showing significant gains across different regions, particularly in Mainland China, which increased 680 bps to 15.9%. Organically, sales rose by 4% year-over-year, with skin care contributing a notable increase of 620 bps to reach a margin of 22.1%, and makeup also improving significantly. The company's strategic investments in consumer marketing and product innovation, alongside strong demand during critical shopping periods, have positively impacted sales growth and operating income, reinforcing the overall positive outlook for the firm.

Estee Lauder's SG&A expenses have remained high at 62.1% of sales, although they improved slightly from the prior year's levels, indicating ongoing cost challenges that could impact profitability. While total inventories decreased by 5.3% year-over-year, this reduction was largely influenced by a one-time accrual related to anticipated product returns, suggesting potential difficulties in demand management ahead of new product launches. Additionally, the firm's projected normalized FFO per share for fiscal 2026 falls short of prior consensus estimates, with a lower-than-expected growth rate of 4%, reflecting underlying pressures in key segments, particularly the travel retail business, which previously experienced significant declines.