Why Estee Lauder Inc. Is Worth $144

by Trefis Team
Estee Lauder
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Estee Lauder (NYSE: EL), Inc. engages in the manufacture of skin care, makeup, fragrance, and hair care products. During the recent FY 2018 annual earnings their revenue continued its growth momentum and the company reported better-than-expected sales growing by 16% y-o-y.  This growth was primarily driven by strong performance in its Skin care and Makeup segments. Additionally, EL’s growth drivers and aggressive growth strategies are helping it in maintaining its dominance in the beauty market. The company is on track with the implementation of the Leading Beauty Forward initiative, directed toward better-management of costs and operations, which will help it grow stronger in the coming years.

For 2019, The company has committed to deliver innovation that is truly differentiated, generate higher returns via continued cost and productivity initiatives, and ultimately generate strong returns for their shareholders. The company forecasts the full fiscal 2019 sales to rise between 7% to 8% (excluding currency translation and impact from the adoption of the new revenue recognition) versus the prior-year period, reflecting the strong momentum behind the company from a solid performance in 2018. The continued emphasis on a digital-first approach and on fast-growing markets and channels in new geographies is also expected to contribute to this growth.

Keeping in mind the management’s focus on growth initiatives, we anticipate the company to post progressive results in the future. Our price estimate of $144 is dependent on a FY19 sales forecast of $14.4 bn, up 5.5% from $13.6 bn last fiscal. We also expect net income margin to be ~11.4%, a Price-to-Earnings multiple of 33 and an average share count of 375.3 mn, giving a share price estimate of $144, roughly 10.7% above its current market price.

Our revenue estimate of $144 bn for FY2019 is arrived at by projecting revenues for all its segments:  Skin care, Makeup, Hair Care, Fragrance, and Other Segment, which represents the total net sales, and following historical growth trends and the percentage contribution of each segment to total to the company’s top line.

The P/E multiple is also forecast taking into account the historical data and its likely trend. Detailed steps to arrive at our price estimate are outlined in our interactive dashboard Is the Market Pricing Estee Lauder Inc. Fairly? You can modify our assumptions to arrive at your own price estimate for the company.


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