Estée Lauder Companies (NYSE: EL) is
a leading manufacturer and marketer of skin care, makeup, fragrance and hair care products. These are sold in over 140 countries under a variety of established brands, including Estée Lauder, Aramis, Clinique, Bobbi Brown, American Beauty and Grassroots. The firm also operates as a licensee for such fragrance and cosmetic names as Tommy Hilfiger, Kiton, Donna Karan, Daisy Fuentes and Mustang. Estée Lauder sells its products through department stores, specialty retailers, pharmacies and salons, as well as company-owned stores, spas and Web sites. Elizabeth Arden (NASDAQ: RDEN), Procter & Gamble (NYSE: PG) and Revlon (NYSE: REV) are major competitors.
The firm pleased investors earlier in the month, when it reported fiscal Q4 EPS of 61 cents and revenues of $2.01 billion. Analysts had been looking for 56 cents and $1.93 billion. The CEO noted that strategic investments have enabled the company to continue building worldwide share, as it leverages opportunities in emerging markets. Management also guided Q1 EPS to 18-25 cents (24 cent consensus), FY09 EPS to $2.57-$2.72 ($2.66 consensus) and FY09 revenues to about $8.38-$8.54 billion ($8.38B consensus).
The EL share
price popped on the news and then moved into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with one "strong buy", thirteen "holds" and one "underperform". The EL Price to Sales ratio (1.24), Price to Free Cash Flow ratio (23.22), Sales Growth rate (14.17%), EPS Growth rate (35.56%), Return on Assets (9.89%), Return on Investment (16.00%) and Return on Equity (33.71%) compare favorably with industry, sector and S&P 500 averages. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $37.03 and $52.04. A stop-loss of $44.50 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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