Should You Pick Estée Lauder Stock At $65?

Estée Lauder (NYSE: EL) recently released its Q2 fiscal 2025 results (fiscal ends in June), with revenues and earnings exceeding the street estimates. It reported sales of $4.0 billion and adjusted earnings of $0.62 per share, compared to the consensus estimates of $4.0 billion and $0.32, respectively.

The company has been struggling with falling sales and profits lately, amid weakness in China. This has reflected in its stock as well, which plunged 51% since the beginning of 2024, significantly underperforming the broader S&P500 index, up 27%. If you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

How Did Estée Lauder Fare In Q2?

Estée Lauder’s revenue of $4.0 billion in Q2 was down 6% y-o-y. Looking at segments, the company reported a 12% fall in Skin Care sales, 8% decline in Hair Care, 1% drop in Makeup sales, and the Fragrance revenues were up 1%. Looking at sales by geography, EMEA was down 6%, Americas was down 2%, and Asia Pacific down 11%. The decline in the EMEA region can be attributed to lower sales for the company’s global travel retail business. A continued decline in mainland China demand weighed on overall Asia Pacific sales.

The company reported an adjusted operating margin of 11.5% in Q2’25, reflecting a 200 bps fall y-o-y.  The adjusted EPS stood at $0.62, vs. $0.88 in the prior-year quarter. Looking forward, Estée Lauder expects its Q3 sales to fall around 9% and earnings to plunge 75% y-o-y to around $0.25 per share, at the mid-point of the provided range.

How Does This Impact EL Stock?

While the company reported Q2 better than the street estimates, its bleak Q3 outlook didn’t sit well with the investors, resulting in a sharp 16% fall in EL stock post the results announcement. Even if we look at a slightly longer timeframe, the changes in EL stock over the recent years have been far from consistent, with annual returns being considerably more volatile than the S&P 500.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Considering the current uncertain macroeconomic climate characterized by fluctuating interest rates and persistent trade tensions, will Estée Lauder continue to experience a downturn, or is a recovery imminent? We estimate Estée Lauder’s Valuation to be $78 per share, reflecting around 20% upside from its current levels of $65.

EL stock has enjoyed higher valuation multiples in recent years, with its average P/S ratio of 5.1x over the last five years. However, at its current levels of around $65, EL stock is trading at 1.5x trailing revenues. With falling sales and profitability and trends in China prestige beauty demand, we think the valuation multiple will likely remain lower in the near term.

While EL stock looks like it has little room for growth, it is helpful to see how Estée Lauder’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 2/5/2025
[2] Cumulative total returns since the end of 2016

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