Estée Lauder: A Mildly Alarming Dip

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Shares of Estée Lauder (EL 19.25%) experienced a rather noticeable adjustment downwards today – a fall of 18.4% as of late afternoon. Which, when you consider the sheer, improbable vastness of the universe, is statistically inevitable, but still a bit inconvenient for anyone who recently purchased said shares. (It’s a bit like expecting a Tuesday. You know it’s coming, but it’s never quite as exciting as you hoped.)

The company reported earnings this morning, and on the surface, things weren’t terrible. They weren’t exactly soaring amongst the nebulae, mind you, but they weren’t plummeting into a black hole either. Estée Lauder has been attempting a turnaround, a process that, in the grand scheme of things, is about as effective as trying to herd cats with a laser pointer. The stock had, rather prematurely, doubled from its low point last April – a point which, in retrospect, was probably the sensible time to buy. Therefore, while the December quarter showed some progress, it wasn’t enough to maintain the illusion of unstoppable upward momentum. Investors, it seems, are a remarkably fickle species.

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Estée Lauder Accelerates… Slightly

Revenue grew 5.8% to $4.23 billion, and earnings per share were up 43% to $0.89. Numbers that, if you squint and tilt your head, almost look impressive. But let’s not get carried away. This 5.8% growth, while an improvement over the previous quarter’s 3.5%, still fell a little short of expectations. It’s a bit like ordering a slightly-too-small universe – perfectly functional, but ultimately unsatisfying.

Estée Lauder is doing a commendable job of clawing back market share while simultaneously reducing costs. It’s a delicate balancing act, akin to juggling planets while riding a unicycle. A recovery in China has also been a factor, with a 13% growth last quarter. All geographies were, thankfully, in positive territory – Europe and the Middle East up 9%, and the U.S. and Asia Pacific ex-China each up 1%. A global triumph of cosmetics, or merely a temporary reprieve from the inevitable heat death of the universe? The jury is still out.

Forward guidance, however, appeared… restrained. Management is predicting 3% to 5% growth for the fiscal year ending in June 2026 – a deceleration from the previous quarter. They also anticipate adjusted EPS of $2.05 to $2.25. They’ve already made $1.21 through the first two quarters, so investors were perhaps expecting a slightly more ambitious forecast. And, rather inconveniently, they’re bracing for a $100 million hit from tariffs. Tariffs. Honestly. It’s like adding a surcharge to the fabric of spacetime.

Estée Lauder’s Stock Had Prematurely Soared

Investors, it appears, got a bit ahead of themselves last year. Years of decline gave way to modest growth, and suddenly everyone was expecting miracles. Currently, the stock trades at 44 times this year’s adjusted EPS estimates, even after today’s drop. That valuation implies continued growth and a substantial profit recovery. A bold assumption, given the inherent unpredictability of consumer spending. (Consider, if you will, the average human’s ability to consistently choose sensible footwear. The odds are not in their favor.)

The past two quarters have shown some “green shoots,” but management doesn’t seem particularly confident that results will accelerate anytime soon. Remember, Estée Lauder sells expensive makeup. That requires a strong global consumer willing to spend, which, let’s be honest, is a remarkably fragile concept. It’s all rather contingent on the continued existence of disposable income and a general lack of existential dread. A tall order, even on a good day.

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2026-02-06 00:03