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Estee Lauder (EL) Posts Better-Than-Expected Q2, Lifts 2013 View

 February 05, 2013 08:00 AM

(By Balachander) Estee Lauder Companies Inc. (NYSE: EL), a maker of skin care and fragrance products, posted better-than-expected quarterly results on sales gains in each of its geographic regions and major product categories. EL issued third-quarter outlook and boosted its view for the full year.

The company said it expects continued solid growth in the U.S., many emerging markets and e-commerce and improving trends in travel retail.

The global prestige beauty industry continues to experience mixed results and overall growth has slowed from the prior year as the company expected, Estee Lauder said.

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Excluding charges, earnings per share (EPS) increased 14 percent to $1.16 from $1.01, beating market expectations of $1.05 for the second quarter. Net earnings grew 13 percent to $449.4 million.

Net sales rose 7 percent to $2.74 billion, topping consensus estimates of a growth of 5.90 percent. The company said sales growth was solid in the United States and certain developed countries and rose strongly in emerging markets.

Gross margin improved to 80.6 percent from 79.9 percent for the second quarter. Operating income margin also expanded to 22.3 percent from 21.8 percent.

Looking ahead for the third quarter, EL sees EPS, before charges, between 28 cents and 32 cents, trailing Wall Street projections of 47 cents. It forecasts net sales growth between 3 percent and 4 percent in constant currency.

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For the full year, the company now expects EPS, before charges, in the range of $2.51 to $2.59 from prior expectations of $2.47 to $2.56.

Net sales growth is still expected between 6 percent and 7 percent. Analysts expect earnings of $2.57 per share on sales gain of 5.40 percent for the year ending June 2013.

EL shares, which have been trading between $49.81 and $65.60 over the past year, closed Monday's regular trading at $61.05.

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