Unlike a certain former governor of Illinois, I'm not afraid to admit it when I'm wrong. So, when I noticed that makeup maven Estee Lauder Companies (NYSE: EL) was trading significantly lower today in the wake of its latest earnings report, I decided to take a fresh look at the stock. Was my bullish endorsement back in December completely wrong-headed, or is today's drop just a blip on the charts?

First, let's sum up the quarterly results. EL banked a second-quarter profit of 80 cents per share on $2.04 billion in revenue. The profit number exceeded analysts' expectations by three cents per share, while revenue matched consensus estimates. However, the company warned that third-quarter net sales are expected to drop 2% to 4%, and it announced plans to cut its headcount by 2,000 employees over the next two years -- roughly 6% of its workforce.

The Estee Lauder Companies Inc. (NYSE: EL) made the Wall Street Journal (subscription required) on Tuesday as the company that had a rise in stock price but the largest outflow of money. Perhaps now that the company's IRS problems are behind it and all sectors are showing profits, insiders want to take their share of the profits. The news from the company's 4Q and FY 2007 report is very positive. All product categories in all regions increased sales, though the increases in the U.S. were the smallest. FY sales topped out at over $7 billion, FY net earnings from continuing operations rose $124 million to $448.7 million, and FY diluted EPS increased 45% to $2.16. Numbers for just 4Q 2007 were as good. EPS of $0.45 was double that of 4Q 2006 when the company was embroiled in tax problems.

Whether organized by geographic region or product category, sales and earnings are headed in the right direction. Estee Lauder is increasing its sales channels to include a larger internet presence, more products in European pharmacies, as well as moving into direct-response television advertising. This sales reorganization comes at the cost of $30 million for discontinuing slow selling and lower profit margin items, as well as reconfiguring an international distribution network. The strategy seems to be working as makeup, fragrance, and hair care sales are up 11% in Asia, 10% in Europe and the Middle East, and 3% in the U.S.

Operating cash flow declined significantly, due primarily to stock repurchases. CEO William Lauder forecasts that 1Q 2008 sales will grow 5-7%, and FY 2008 sales growth will be 7%-9%. Diluted EPS will be $2.28-2.40 with hair care products being the biggest seller. The stock currently trades right around $40.00.