Estee Lauder Jumps Most in Seven Years as Asia Powers Expansion

(Bloomberg) -- Estee Lauder Cos. shares surged as much as 15 percent -- the most in more than seven years -- after the company boosted its full-year profit outlook on booming skin-care sales in Asia, overcoming concerns about a slowing Chinese economy and a trade war with the U.S.

  • The company now sees full-year adjusted earnings per share of $4.92 to $5, up from a previous range of $4.73 to $4.82. That’s higher than the average estimate from analysts.

Key Insights

  • The rosier forecast may ease fears about a luxury slowdown in China. The outlook builds on LVMH’s strong handbag and cognac sales in that critical luxury market, showing that shoppers are still willing to splurge.
  • It’s not just China that’s powering Estee Lauder in Asia, however. The company also flagged strong growth in Hong Kong, South Korea and Japan. Estee Lauder said it generated “double-digit sales net sales growth in virtually every major product category and channel” in the region.
  • Estee Lauder investment in high-growth brands such as Becca, Le Labo and Too Faced in recent years seems to be paying off. “Our sustained progress is the result of our multiple engines of growth strategy,” Chief Executive Officer Fabrizio Freda said in the company statement.
  • Skin-care has performed especially well for Estee Lauder over the past year, with growth outpacing that of its makeup business. The segment has been a hot topic lately, with shoppers flocking to products such as nighttime repair serums and antioxidant creams.
Estee Lauder Jumps Most in Seven Years as Asia Powers Expansion

What Our Analysts Say

Estee Lauder’s superior-growth strategy is multifaceted, boosting our confidence in its long-term success. Skin-care -- over 40 percent of revenue and more than 50 percent of profit -- leads, and accelerating Asian demand is helping to deliver some of the best growth rates in 20 years. 
-- Deborah Aitken, analyst for luxury goods, beauty and personal care

Click here to view the research. 

Market Reaction

  • Estee Lauder shares jumped as much as 15 percent to $157.01, the biggest gain since 2011. The stock had risen 4.7 percent this year through Monday’s close, compared with the 8.7 percent increase in the S&P 500 Index.

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