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Estée Lauder turns weak on missing Q4 rev. estimates

Estée LauderCosmetics manufacturer Estée Lauder (NYSE: EL) reported a 5% y-o-y rise in the fiscal 2016 fourth-quarter revenue, compared to the prior year similar period. However, the investors remain largely pessimistic towards the share price due to poor fiscal 2017 first-quarter non-GAAP earnings outlook. The company also issued lower than anticipated earnings guidance for the full year 2017. Thus, it would be prudent on the part of binary traders to have a bearish view on the stock, which closed at $91.57 yesterday.

The New York-based company reported fourth-quarter net sales of $2.65 billion. The revenue was higher than the Q4 2015 net sales of $2.52 billion, but less than the Wall Street estimates of $2.66 billion.

The fourth-quarter net earnings plunged 39% to $93.5 million or $0.25 per share, from $153 million or $0.40 per share in the similar period last year. Excluding charges, the net earnings stood at $163.1 million or $0.43 per share at the end of the quarter ended June 2016. The net earnings exceeded the Thomson Reuters estimate of $0.40 per share.

Estee Lauder

For the fiscal 2017 first-quarter, Estée Lauder anticipates an increase in revenue between 1% and 2%, compared to the full-year 2016. The company reported Q1 2016 net sales of $2.834 billion. Estée Lauder anticipates first-quarter GAAP earnings to be in the range of $0.65 to $0.71 per share. The company also forecasts non-GAAP earnings to be between $0.73 and $0.77 per share. Both GAAP and non-GAAP earnings view of the company is lower than the fiscal 2016 first-quarter GAAP and non-GAAP earnings of $0.82 per share.

For the full year 2017, the company expects a 6% to 7% growth in the net sales compared to the fiscal 2016. Estée Lauder posted revenue of $11.26 billion in the fiscal 2016. The EPS for the fiscal 2017 is expected to be in the range of $3.38 to $3.44 per share. The FY17 earnings estimate of analysts’ currently stands at $3.53 per share.

The company also anticipates recording a restructuring charge in the range of $80 million to $100 million in the fiscal 2017. On a per share basis, this works out to be $0.14 to $0.18 per share. Thus, fundamentally, the poor first-quarter and fiscal 2017 EPS outlook is expected to keep the share price range bound with bearish bias.

In the past five months, the stock had failed several times in its effort to cross the level of 94, which now serves as the major resistance. The chart reveals next major support (S1) at 86. The descending stochastic indicator is on the verge of crossing below the level of 50. Thus, we can expect the share price to decline at least till the S1 level.

Estée Lauder Stock Price: August 24th 2016

Estée Lauder Stock Price: August 24th 2016

So, it would be wise to purchase a one touch put option in such a scenario. The target level for the put option contract should be greater than or equal to $86. A contract validity period of at least three weeks is a must to enter the trade.


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