Estee Lauder upgraded to buy at Citi on signs of P&L inflection

In a note Tuesday, Citi analysts upgraded shares of Estee Lauder (NYSE:) to Buy from Neutral, raising the price target to $175 from $160 per share.

The investment bank told investors that they see early signs of a profit and loss inflection.

“We believe the company is nearing a top line inflection point as channel inventories in Asia Pac Travel Retail are normalizing and EL is closer to balanced sell-in/sell-through,” explained the bank.

Citi notes that the stock was penalized in 2023 (down 41%) for “significant sales and profit degradation on the TR inventory reduction and negative margin mix.”

However, they state that for the last six months, EL “remained consistent that Asia Pac TR inventories would balance by the end of F3Q’24.”

Combined with CEO Fabrizio Freda’s optimistic messaging and tone at the company’s recent presentations, it has given Citi confidence the company is getting close to the inflection.

“EL expanded and accelerated its profit recovery plan for FY25-26, which we think sets a floor on earnings and allows the market to begin thinking about a path forward to normalized earnings for the company,” concluded the bank.

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