(By Balaseshan) Oppenheimer & Co. analyst Joseph Altobello revised his earnings estimates for Estee Lauder Companies Inc. (NYSE:EL) after the company's third quarter results. The brokerage maintained its "Perform" rating.
Estee Lauder's fiscal 3Q EPS of $0.38 exceeded both Altobello's and Street estimates as well as guidance, though top-line trends appeared to slow a bit, even adjusting for timing shifts. Further, full-year EPS guidance was raised only modestly, while F4Q guidance looks a bit light.
EL reported solid 3Q results, as adjusted EPS of $0.38 was up 7% year-over-year and beat both the analyst's and the consensus estimates of $0.32 and $0.33, respectively, while also exceeding guidance of $0.28-0.32. Adjusted net sales increased 4% in local currency versus his estimate of 6% and guidance of 4-5%.
However, both the quarter and base period were impacted by timing shifts related to SAP launches, reducing sales growth by 3% and EPS by $0.09, although Altobello did have these already factored into his model. Second, return provisions related to new sunscreen regulations in the U.S. reduced sales by 70 basis points and EPS by $0.03.
Adjusted gross margin of 79.1% was up 130 bps primarily on mix and pricing, in line with the analyst's estimate. Adjusted operating income grew 3%, to $240 million while operating margin was flat year-over-year at 10.7%, versus his estimate of 8.7%. Adjusting for the SAP-related timing shifts, operating income rose 31% while operating margin increased 210 basis points, to 11.6%.
EL also increased 2012 guidance which includes adjusted EPS of $2.21-$2.26 (up 19%-22%) versus $2.16-$2.23 prior, though Altobello and the Street are already at the high end. Also, 4Q adjusted EPS is expected at $0.11-$0.16 versus last year's $0.12, below both his prior estimate and consensus of $0.21.
The brokerage raised its Q1-2013 EPS estimate to $0.80 from $0.79, its Q3-2013 estimate to $0.48 from $0.39 and its 2013 estimate to $2.60 from $2.55. The firm lowered Q4-2012 EPS estimate to $0.15 from $0.21 and Q4-2013 estimate to $0.18 from $0.23, while maintaining its 2012 estimate of $2.25 and Q2-2013 estimate of $1.13.
Altobello is maintaining his "Perform" rating on EL, as top-line trends appeared to slow a bit in the March quarter, though he would use further pullbacks to get more constructive.
Estee Lauder is a manufacturer and marketer of skin care, makeup, fragrance and hair care products. Its products are sold in over 150 countries and territories under a number of brand names, including Estee Lauder, Aramis, Clinique, Origins, M.A.C, Bobbi Brown, La Mer and Aveda.
EL is trading up 1.04% at $61.35 on Monday.