Estee Lauder (EL) is expected to benefit from a rebound in China beauty products demand and a recovering travel retail business, with the growth not yet reflected in the share price, BofA Securities said in a note Wednesday.
The company's new fiscal 2030 targets imply earnings per share of $5.06 to $6.22, a compound annual growth rate of 20% to 25%, according to the note. BofA raised its fiscal 2030 EPS estimate by 9% to $5.83 on an improved gross margin outlook.
Revenue from mainland China and China travel retail totaled $3.9 billion, and the investment firm said it expects China revenue to grow at a 7% CAGR from fiscal 2027 to fiscal 2030 versus 4.5% growth for the group.
Estee Lauder has a 22.2% share of China's prestige beauty market as consumer demand outpaces shipments to retailers, while online sales, new store openings, fragrance and a new innovation center can sustain the recovery, the investment firm said.
Travel retail is shifting from a drag to a growth contributor, with revenue expected to rise about 7% to about $2.4 billion in fiscal 2027 to add 1 percentage point to group growth, the firm added.
BofA Securities kept its buy rating on the stock and raised its price target to $128 from $126.
Price: 112.70, Change: -0.73, Percent Change: -0.64
