Estee Lauder (NYSE:EL) is due to announce its Q2 results next Friday. It had a stellar run in 2011 when it grew almost 3x faster than the global prestige beauty market with a double digit growth rate in sales and impressive margin growth. As a result, Estee Lauder’s stock swelled by more than 40% in 2011. Riding on excellent momentum, we expect to see further market share expansion and operating margin growth this quarter, leaving behind its competitors Revlon (NYSE:REV) and L’Oreal (PINK:LRLCY). The company also went for a 2:1 common stock split last week and paid 40% higher dividend last year.

View our detailed analysis for Estee Lauder here

Strong Prestige Beauty Sales

Globally, the prestige beauty segment remained very strong with sales growth exceeding 8% in 2011, outpacing the mass segment sales. Last quarter, Estée Lauder achieved 18% sales growth and grew its market share in its most valuable Skin Care business by 1.3% – the division that contributes over 53% of Estée Lauder’s stock price.

With strong international growth, it passed its operating margin target of 12%-13% by fiscal 2013 two years in advance and has set a new operating margin target of 15%. With excellent growth momentum, we expect to see double digit revenue growth and improved margins in Q2 as well. The company expects an overall operating margin improvement of 80-100 basis points this year, compared to last year.

The 2:1 Stock Split

After the stock swelled by more than 40% in 2011, Estee Lauder went for a two-for-one common stock split last week. Accordingly, we have a Trefis price estimate of $58 for Estee Lauder stock. With the split, the stock will seem more affordable to smaller investors and can help provide greater access and liquidity in the market, and it is also an indication to the market of the management’s optimistic outlook for long-term growth. (Read - Estée Lauder Update: Stock Split and Higher Dividend After Impressive Year)

Understand How a Company’s Products Impact its Stock Price at Trefis

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