Stocks suffered a scary drop on Friday. It was fitting, in a sense, since it was the day before Halloween. In fact, as this Closing Bell piece noted, there were more tricks than treats to be had on Wall Street.
There are always equities bucking the trend, however. The Estee Lauder Companies (NYSE: EL) was one of them. Bullish buyers loved the beauty company's fiscal Q1 earnings release. As has been the case with many reports, the top line wasn't the fun part of the document: Estee Lauder saw a decrease of 2.7% for adjusted revenues. Here's the item of interest: net income after charges was 85 cents per share, more than three times what was made in the comparable frame.
Amazingly enough, the company was far ahead of analyst expectations. According to Earnings.com, the call was for 34 cents per share.
This result must have taken many investors by surprise. And you have to believe that the stock would have closed even higher on Friday had the overall mood of the markets been less bearish. Shares of Estee Lauder were up over 3% by the end of the trading session, on very high volume.
Estee Lauder raised its outlook for the entire fiscal year. The future looks to be bright for the business, but anyone who is holding a profitable paper position in this entity should probably take a little time to evaluate the macro environment.
Consumer confidence could be the negative element that unwinds the recent rally. Not only would this pressure the stock, but from a more fundamental viewpoint, a less optimistic consumer might impact the potential behind Estee Lauder's portfolio.
Personally, I'd be a seller of Estee Lauder if I held shares at an attractive cost basis. Book the profits now ahead of the pain we may get later. Estee Lauder is a strong brand in its industry, one that includes Avon Products (NYSE: AVP), Procter & Gamble (NYSE: PG), and Revlon (NYSE: REV). It'll probably be fine over the long haul, but it's difficult to ignore a broad sell-off like the one we saw yesterday.
Disclosure: I don't own any company mentioned; positions can change without notice.
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