Analysts downgrade Estee Lauder as guidance cut a ‘major disappointment’

Shares of Estee Lauder (NYSE:) plunged following the company’s earnings release on Wednesday, which has prompted analysts at Telsey and RBC Capital to downgrade the stock.

Analysts at RBC Capital lowered the stock to Sector Perform from Outperform, cutting the price target to $115 from $195 per share. They stated that while “EL’s F1Q’24 played out better than expected, the material guidance cut was a major disappointment.”

“While the data points around China were negative during the quarter, we thought EL’s guidance (provided last quarter) already embedded this dynamic. We were clearly wrong. While we gave management the benefit of the doubt on having a handle on the situation, there are simply too many headwinds and not enough visibility at this time for us to believe in the 2H growth story,” wrote the analysts.

At Telsey Advisory Group, analysts provided similar commentary, downgrading the stock to Market Perform and lowering the price target to $115 from $210.

“While the fiscal first quarter was expected to be challenged given ongoing headwinds in the Asia travel retail business, EL delivered solid results with the earnings upside driven by better-than-expected gross margin and expense control as sales were largely in-line,” the analysts explained.

“Despite a solid start to FY24, EL is taking a more cautious view of the balance of the year, primarily reflecting slower growth in prestige beauty in mainland China, while an incremental 22-cent drag from business disruption in Israel/Middle East and continued pressure in Asia travel retail are also expected to weigh on sales and margins. As such, EL significantly lowered its sales and earnings guidance for the year,” they added.