Shares of Estée Lauder (EL) are down 20% after the cosmetics company lowered its annual sales and profit forecasts while cutting its quarterly dividend payment to stockholders.
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The company, known for its make-up and perfumes, said it is continuing to struggle with weak consumer demand in China, one of its biggest sales markets. Consequently, Estée Lauder declared a quarterly dividend of $0.35 per share, down 47% from $0.66 previously. EL stock previously had a hefty dividend yield of 3.86%.
At the same time, the company lowered its guidance, saying it now expects a profit in the current quarter of $0.20 to $0.35 per share. That’s far below the consensus forecast of analysts that called for earnings per share (EPS) of $1.06. Estée Lauder added that it anticipates its net sales will decline 6% to 8%. That compares with an estimate of 0.24% growth in the current quarter.
A Crumbling Stock Price
News of the reduced guidance and dividend payment comes on the heels of the company appointing longtime insider Stephane de La Faverie to be its new CEO and, hopefully, turn around the business. He is scheduled to take the helm of the struggling cosmetics company on January 1, 2025.
The latest plunge in EL stock accelerates a decline in the share price that has been going on for months. Year-to-date, Estée Lauder’s stock has fallen 52%. The company is grappling with a pullback in consumer spending on luxury goods such as makeup and fragrances amid still elevated interest rates. The decline in China has been particularly hard on the company’s finances, says management.
Is EL Stock a Buy?
The stock of Estée Lauder has a consensus Hold rating among 25 Wall Street analysts. That rating is based on six Buy and 19 Hold recommendations made in the last three months. There are no Sell ratings on the stock. The average EL price target of $104.33 implies 50.83% upside from current levels.
