Estee Lauder Companies, Inc. - Momentum

Estee Lauder Companies, Inc. (EL) just hit a new all-time high after reporting an impressive 23% earnings surprise in early February. With estimates on the rise and a bullish growth projection, this Zacks #1 rank stock offers a fresh look for momentum.

Company Description

The Estee Lauder Companies, Inc, develops and sells a wide range of skin care, makeup, fragrance and hair care products worldwide. The company was founded in 1946 and has a market cap of $19 billion.

Estee Lauder has been hot for the last six months, jumping from $65 in late October to a recent high above $95. Those gains have been fueled by robust sales out of the recession, on display with strong Q2 results from early February that came in ahead of expectations.

Second-Quarter Results

Revenue for the period was up 10% from last year to $2.49 billion. Earnings also looked good, coming in at $1.77, 23% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 12% over the last four quarters.

The strong quarter was led by its largest segment, Skin Care, where sales were up 14% from last year to $1.03 billion. Its Fragrance Segment was close behind, with sales up 11% from last year to $448 million.

From a geographic perspective Asia/Pacific saw the biggest sales increase, up 16% to $512 million. Europe, the Middle East & Africa eclipsed the Americas as the largest segment with an 11% increase in sales to $993.

Financial Profile

Estee Lauder will also continue to benefit from its strong financial profile, with cash and equivalents of $1.04 billion and total debt of $1.23 billion, down $173 million from last year.

Estimates

We saw some solid movement in estimates off the good quarter, with the current year adding 44 cents to $3.68 while the next-year estimate gained 50 cents to $4.24, a bullish 15% growth projection.

Valuation

In light of recent gains, the valuation does look a bit pricey, with a forward P/E of 26X a premium to its peer average of 16X.

12-Month Chart

On the chart, EL just hit a new all-time high after climbing with the market for the last two weeks. The MACD below the chart is looking bullish too, with the short-term moving average advancing above the long-term average. Look for support from the long-term trend on any weakness, take a look below.