Estee Lauder Rockets Talks Earnings and Restructuring Plan; ELF Beauty is hitting a new high with deserved results

Estee Lauder (theIt jumped to lead the S&P 500 on Monday after announcing layoffs and a new restructuring plan during second-quarter earnings. Meanwhile, ELF Beauty is eyeing a new all-time high ahead of its third-quarter report late Tuesday.

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Estee Lauder reported its adjusted earnings fell 43% to 88 cents per share, after four quarters of accelerating declines and beating the FactSet estimate of 54 cents. Net sales fell 7% to $4.28 billion, but came in above expectations of $4.19 billion.

Estee Lauder reported an 8% decline in organic net sales, which it attributed to challenges at retail in Asia and continued weakness at its prestige beauty brands in mainland China. This decrease also reflects a 1% impact due to business disruptions in Israel and the Middle East.

Estee Lauder restructuring plan

Estee Lauder expects to return to “strong” organic sales growth in the second half of fiscal 2024, which will increase its profitability from the first half of the year.

The cosmetics company also announced a new restructuring program starting in the third quarter as part of a profit recovery plan in 2025 and 2026. The plan will focus on rebuilding more sustainable profitability and supporting the acceleration of sales growth while lowering the cost base and reducing overhead, as well as investing in key consumer-facing activities. Estée Lauder expects the initiative to improve gross margins and its expense base.

Estee Lauder plans to reduce its workforce by 3% to 5% as part of a restructuring plan, and will retrain and redeploy some employees. The company expects to restructure the fees in the amount of $500 million to $700 million, but will produce annual total benefits of $350 million to $500 million. Estee Lauder now sees the profit recovery plan will result in additional operating profits of $1.1 billion to $1.4 billion, compared to the previous forecast of $800 million to $1 billion.

Prospects

The cosmetics company gave a broad outlook for third-quarter adjusted earnings, forecasting an 18% decline to a 3% gain. Estée Lauder expected GAAP earnings to range between 35-46 cents per share, compared to 43 cents per share last year. The company guided for a 3% to 5% increase in third-quarter net sales, which will include another 1% headwind due to unrest in the Middle East.

FactSet analysts expect third-quarter adjusted earnings of 81 cents per share on revenue growth of 3.1% to $3.87 billion.

El Stock

EL stock rose 13% on Monday to its highest level since September and led the S&P 500 during intraday trading.

Estee Lauder stock has rallied solidly above its 50-day moving average and is approaching the 200-day line.

Dwarf beauty

Member IBD Leaderboard Dwarf beauty (dwarf) reports third-quarter results late Tuesday.

FactSet expects earnings to rise 19% to 57 cents per share, slowing for the third straight period after four quarters of triple-digit gains. Analysts expect a 63% rise in revenue to a record $238.9 million, after sales growth averaged about 77% in the last three quarters.

ELF stock rebounded near a new record high on Monday after falling more than 4% in early trading.

Last week, ELF Beauty hit an all-time high after breaking out on Friday above a tight three-week entry level of 164.71.

Shares of the cosmetics brand were up nearly 18% through February 2 after a fundamental breakout in early December.

You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison

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