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Estée Lauder Announces the Acquisition of BECCA and Too Faced

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Price movement

Estée Lauder (EL) has a market cap of $29.2 billion. It fell 0.97% to close at $77.60 per share on November 14, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.7%, -11.1%, and -11.0%, respectively, on the same day.

EL is trading 7.5% below its 20-day moving average, 10.2% below its 50-day moving average, and 14.4% 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 8.5% on November 14.

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

  • Coty (COTY) — $14.4 billion
  • Coach (COH) — $10.5 billion
  • Avon Products (AVP) — $2.6 billion

Latest news on Estée Lauder

In a press release on November 14, 2016, Estée Lauder (EL) reported, “The Estée Lauder Companies Inc. (EL) announced today that it has completed its acquisition of BECCA, a high-growth makeup brand offering complexion and color products that flatter a wide range of skin tones and enhance women’s features.”

In another release, Estée Lauder reported, “The Estée Lauder Companies Inc. (EL) announced today that it has signed an agreement to acquire Too Faced, the feminine, playful makeup brand renowned for high-quality, stylish cosmetics that consumers love.

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“Too Faced, one of the fastest growing makeup brands in specialty-multi and online, is expected to strengthen the Company’s leadership position in the fast-growing prestige makeup category globally, increase the Company’s consumer reach in the specialty-multi channel, and win with millennials- all in strong alignment with the Company’s strategy.”

Performance of Estée Lauder in fiscal 1Q17

Estée Lauder (EL) reported fiscal 1Q17 net sales of $2.9 billion, a rise of 1.1% compared to net sales of $2.8 billion in fiscal 1Q16. Sales of Fragrance and Hair Care products rose 7.0% and 1.5%, respectively, and sales of Skin Care products fell 0.63% in fiscal 1Q17 compared to fiscal 1Q16.

The company’s gross profit margin and operating margin fell 40 basis points and 140 basis points, respectively, in fiscal 1Q17 compared to fiscal 1Q16.

Its net income and EPS (earnings per share) fell to $294.0 million and $0.79, respectively, in fiscal 1Q17 compared to $309.0 million and $0.82, respectively, in fiscal 1Q16.

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Estée Lauder’s cash and cash equivalents fell 27.4%, and its inventory and promotional merchandise rose 2.5% in fiscal 1Q17 compared to fiscal 4Q16. Its current ratio rose to 1.62x, and its debt-to-equity ratio fell to 1.5x in fiscal 1Q17 compared to a current ratio and a debt-to-equity ratio of 1.58x and 1.6x, respectively, in fiscal 4Q16.

Projections

Estée Lauder (EL) has made the following projections for fiscal 2017:

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

The company has made the following projections for fiscal 2Q17:

  • net sales growth: 3%–4% and 5%–6% on a constant currency basis
  • reported EPS: $1.03–$1.10
  • restructuring charges: ~$30 million–$40 million
  • EPS before charges associated with restructuring activities: $1.10–$1.15

Next, we’ll discuss Reynolds American (RAI).

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