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UBS Downgrades Estée Lauder Companies to ‘Neutral’

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Price movement

Estée Lauder Companies (EL) has a market cap of $28.8 billion and rose 1.0% to close at $79.14 per share on January 12, 2017. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 0.69%, 1.2%, and 3.5%, respectively, on the same day.

EL is now trading 1.7% above its 20-day moving average, 1.0% above its 50-day moving average, and 9.8% 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 YTD price movement of IWV was 1.4% on January 12.

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

  • Coty (COTY): $13.7 billion
  • Coach (COH): $9.8 billion
  • Avon Products (AVP): $2.4 billion

EL’s rating and performance in fiscal 1Q17

UBS has downgraded Estée Lauder Companies’ rating to “neutral” from “buy.”

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

The company’s gross profit margin and operating margin narrowed 40 basis points and 140 basis points, respectively, YoY in fiscal 1Q17. Its net income and EPS (earnings per share) fell to $294 million and $0.79, respectively, in fiscal 1Q17, as compared to $309 million and $0.82, respectively, in fiscal 1Q16.

Estée Lauder’s cash and cash equivalents fell 27.4% YoY, and its inventory and promotional merchandise rose 2.5% YoY in fiscal 1Q17.

Projections

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

  • net sales growth of 6.0%–7.0%
  • reported EPS of $3.20–$3.30

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

  • net sales growth of 3.0%–4.0% and 5.0%–6.0% on a constant currency basis
  • reported EPS of $1.03–$1.10

Next, we’ll take a look at Colgate-Palmolive (CL).

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