Should you invest in Estee Lauder's post-earnings pullback?

As a result of restructuring charges, EL now expects full-year earnings of $1.30 to $1.60 per share, compared to analysts' mean estimate for $1.39 per share. On the upside, the firm is predicting cost savings of $450 million to $550 million as a result of the payroll reduction, along with a company-wide freeze on merit raises and a continuation of the current hiring freeze.

Heading into the report, option players had low expectations for EL -- during the past 10 days, traders on the International Securities Exchange (ISE) have bought to open 9.62 puts for every call. This ratio ranks higher than 91.8% of comparable readings during the past year, which indicates that speculative investors on the ISE have rarely shown a greater preference for bearish bets.

In fact, during the past week, traders on the ISE have purchased 4,075 puts on EL, compared to just 127 calls. In the same skeptical vein, short interest represents nearly 7% of the equity's available float, and Zacks reports that six out of nine analysts maintain a cautious Hold rating. Overall, it looks as though there's plenty of pessimism already priced into the shares of this cosmetics concern.

The stock is dawdling around a 3% decline today as investors digest the news. Back in December, I noted that EL was "hovering close to previous chart support in the mid-20s." Wouldn't you know it -- as of this writing, the shares are trading fractionally above that critical 25 level. The stock hasn't finished a week below this region in more than a decade, which indicates that we're dealing with a solid support level.

In short, I'm not totally embarassed with my EL pick (admittedly, I'm a Cincinnati Bengals fan; I'm hard to embarass). The stock is making progress in fits and starts, and the recent retreat back to long-term support indicates that the shares could be preparing for a bounce during the short term.

So, is EL a cheap stock worth investing in? For the long term, I still think this one's a winner. However, it bears mentioning that some headwinds are to be expected until the broader economy begins to recover. William P. Lauder himself, the company's chief executive, phrased it best with today's statement: "The current difficult environment, which is global in scale, is not expected to improve in the near term. This underscores how vital it is for us to execute on our long-term strategy, even as we address the short-term challenges."

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.