Have you been paying attention to shares of The Estee Lauder Companies (EL)? Shares have been on the move with the stock up 7.3% over the past month. The stock hit a new 52-week high of $180.42 in the previous session. The Estee Lauder Companies has gained 38.2% since the start of the year compared to the 17.4% move for the Zacks Consumer Staples sector and the 38.2% return for the Zacks Cosmetics industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 1, 2019, Estee Lauder reported EPS of $1.55 versus consensus estimate of $1.3 while it beat the consensus revenue estimate by 4.58%.
For the current fiscal year, Estee Lauder is expected to post earnings of $5.21 per share on $14.79 billion in revenues. This represents a 15.52% change in EPS on an 8.07% change in revenues. For the next fiscal year, the company is expected to earn $5.77 per share on $15.79 billion in revenues. This represents a year-over-year change of 10.65% and 6.78%, respectively.
Estee Lauder may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Estee Lauder has a Value Score of D. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 34.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 29.7X versus its peer group's average of 26.6X. Additionally, the stock has a PEG ratio of 2.66. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Estee Lauder currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Estee Lauder passes the test. Thus, it seems as though Estee Lauder shares could have a bit more room to run in the near term.
How Does Estee Lauder Stack Up to the Competition?
Shares of Estee Lauder have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Helen of Troy (HELE), Unilever (UN), and Unilever (UL), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 20% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Estee Lauder, even beyond its own solid fundamental situation.
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