Estee Lauder Companies Inc. EL is set to report third-quarter fiscal 2015 results on May 5, before the opening bell. Last quarter, it posted a 7.62% positive earnings surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider
Estee Lauder has been posting better-than-expected results for the past several quarters backed by organic sales growth, product innovation and cost savings measures. Although these positives are expected to continue, currency headwind may impact volume of the cosmetics giant during the upcoming quarter. The rising dollar against other currencies like rupee, yen and euro has lowered the export volume for the cosmetics company over the past few quarters.
Meanwhile, the macroeconomic pressures and moderately improving consumer spending environment in the U.S. have been hurting sales of Estee Lauder’s prestige beauty brands. This, coupled with macroeconomic issues in key emerging markets like Hong Kong and Russia, is likely to be reflected in the company’s third-quarter sales results.
Earnings Whispers
Our proven model does not conclusively show that Estee Lauder is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimate. However, that is not the case here due to the following factors:
Zacks ESP: ESP for Estee Lauder is -1.96% since the Most Accurate estimate is 50 cents while the Zacks Consensus Estimate stands at 51 cents.
Zacks Rank: Estee Lauder has a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, we need a positive ESP to be confident of an earnings beat.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies that investors may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Treehouse Foods Inc. THS, with an Earnings ESP of +1.72% and a Zacks Rank #3.
Post Holdings Inc. POST, with an Earnings ESP of +54.55% and a Zacks Rank #3.
Constellation Brands Inc. STZ, with an Earnings ESP of +0.82% and a Zacks Rank #3.
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