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Estée Lauder Acquires BECCA Cosmetics to Expand Its Presence

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Oct. 24 2016, Updated 9:40 p.m. ET

Price movement

The Estée Lauder Companies (EL) has a market cap of $31.6 billion. It rose 0.24% to close at $86.51 per share on October 21, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -0.94%, -2.5%, and -0.79%, respectively, on the same day. EL is trading 1.5% below its 20-day moving average, 2.9% below its 50-day moving average, and 4.5% below its 200-day moving average.

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Related ETF and peers

The iShares Russell 3000 ETF (IWV) invests 0.09% of its holdings in Estée Lauder. The ETF tracks a cap-weighted index that measures the investable US equities market, covering the entire market-cap spectrum, including micro-caps. The YTD price movement of IWV was 6.7% on October 21.

The market caps of Estee Lauder’s competitors are as follows:

  • Coty (COTY) – $17.4 billion
  • Coach (COH) – $10.1 billion
  • Avon Products (AVP) – $3.0 billion

Latest news on Estée Lauder

Estée Lauder has entered into an agreement to acquire BECCA Cosmetics, a provider of complexion and color products, to expand its product portfolio and presence. The terms of this acquisition were not disclosed. The deal is expected to close in November 2016.

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Estée Lauder’s performance in fiscal 4Q16

Estée Lauder reported fiscal 4Q16 net sales of ~$2.7 billion, an increase of ~5.2% over the net sales of ~$2.5 billion reported in fiscal 4Q15. Sales of skincare, makeup, and haircare products rose 2.0%, 10.2%, and 2.7%, respectively. Sales of fragrance products fell 2.4% between fiscal 4Q15 and fiscal 4Q16.

The company reported restructuring and other charges of $99.4 million in fiscal 4Q16. Its operating income fell 37.1%. Net income and EPS (earnings per share) fell to $93.5 million and $0.25, respectively, in fiscal 4Q16, compared with $153.0 million and $0.40 in fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, EL reported net sales of $11.3 billion, an increase of 4.6% year-over-year. Its gross profit margin and operating income rose 0.15% and 0.25%, respectively, in fiscal 2016. Its net income and EPS rose to $1.12 billion and $2.96, respectively, in fiscal 2016, compared with $1.09 billion and $2.82 in fiscal 2015.

Estée Lauder’s cash and cash equivalents fell 10.5% and its inventory and promotional merchandise rose 3.9% in fiscal 2016. Its current ratio fell to 1.6x and its DE (debt-to-equity) ratio rose to 1.6x in fiscal 2016, compared with 2.0x and 1.3x, respectively, in fiscal 2015.

The company has made the following projections for fiscal 2017:

  • net sales growth of 6%–7%
  • reported EPS of $3.20–$3.30
  • charges associated with restructuring charges of $80 million–$100 million
  • EPS before charges associated with restructuring activities of $3.38–$3.44

The company has made the following projections for fiscal 1Q17:

  • net sales growth: 1%–2% and 2%–3% on a constant-currency basis
  • reported EPS: $0.65–$0.71
  • charges associated with restructuring charges: $35 million–$45 million
  • EPS before charges associated with restructuring activities: $0.73–$0.77

In the next part, we’ll look at Skechers USA (SKX).

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