Analyst Bryan Spillane from Bank of America Securities maintained a Hold rating on The Estée Lauder Companies (EL – Research Report) and keeping the price target at $85.00.
Bryan Spillane’s rating is based on the current transitional phase that The Estée Lauder Companies is undergoing. The company is in the early stages of a turnaround plan aimed at achieving sustainable growth in the U.S. and Western Europe, improving manufacturing efficiencies, and reducing its cost structure. These efforts are intended to lessen the company’s reliance on the Chinese and Asian travel retail markets for earnings recovery. However, the transition is expected to be challenging, which supports the Hold rating.
Furthermore, Estée Lauder is simplifying its business operations to foster growth by reducing complexity and consolidating certain business segments. The management is focusing on expanding market share in Western markets and stabilizing declines in China, with future investments planned for international markets such as India, Japan, and South Korea. While there are early signs of progress, including gross margin expansion and operational savings, the company needs to achieve top-line stability before significant margin expansion can occur. This cautious outlook underpins the Hold rating and a price objective of $85.
Based on the recent corporate insider activity of 31 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of EL in relation to earlier this year.