Estée Lauder’s Relative Valuations Compared to Its Peers



Stock price reaction to Estée Lauder’s 4Q15 earnings

The Estée Lauder Companies’ (EL) stock price fell after the company released its 4Q15 earnings. The stock fell 2.2% to open at $86.85 on August 17, 2015, after the results were released. The company’s lower sales growth and adverse foreign currency impacts have led to lower stock performance. But Estée Lauder’s stock is up by ~10.64% in the past 52 weeks. The company registered a one-year high on August 5 at $91.01.

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Stock prices for Procter & Gamble (PG) and Coty (COTY) also fell after they released their earnings on July 30 and August 13, respectively. PG’s stock price fell 2.59% to $76.70, while Coty’s stock price fell ~0.4% to $26.17. To learn more about PG’s earnings, you can read Earnings Analysis: Procter & Gamble’s Performance in Fiscal 2015.

Relative valuations

Estée Lauder is trading at a forward PE (price-to-earnings) ratio of 25.9x, ahead of the S&P 500 Index (IVV) (SPY) (VOO) at 17.7x and the Dow Jones Industrial Index (DIA) at 15.8x. Inter Parfums (IPAR), L’Oréal (LRLCY), and Avon (AVP) trade with forward PEs of 27.1x, 26.5x, and 14.1x, respectively. All valuation figures are as of August 19, 2015.

EL’s sales growth for the trailing 12 months stands at -1.7%. This is the main reason the company’s valuations are lower than its peers. L’Oréal has a sales growth of 1.8%.

Dividend payments

Estée Lauder returned more than 90% to shareholders through dividends and share repurchase activity. The company repurchased ~12.4 million shares for $983 million and reduced diluted shares by more than 7 million shares. EL used $350 million to pay dividends to shareholders. This reflected a 20% increase in the quarterly dividends rate.

According to comments by CFO (chief financial officer) Tracey Travis, the combination of increasing dividend and strong stock performance this fiscal year delivered total stockholder returns of 18.1%.

Estée Lauder’s (EL) dividend yield for the trailing 12 months is 1.1%. PG and COTY have dividend yields of 3.5% and 0.7%, respectively.


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