Estee Lauder Companies Inc.: Plan A

Research evidence excerpt

Estee Lauder Companies Inc.: Plan A

Reiterate Buy at PO $120

We are bullish on the outlook of the global beauty market in 2026. The biggest

sequential improvement will likely be driven by China and Travel Retail, the two

parts of the beauty market which have weighed most heavily on Estee Lauder

Companies earnings over the last three years. After the company confirmed

they were no longer in discussion to merge with Puig, the equity story of Estee

Lauder has become more simple - based on a more supportive market

backdrop combined with self-help through the ‘Beauty Reimagined’ plan. See

our reports Better than imagined. We reiterate our Buy rating on Estee Lauder

Companies and PO of $120. At our PO, Estee Lauder would trade on 3x FY27E

EV/Sales, which is still well below best-in-class beauty peers on 4x EV/Sales.

Estee Lauder share price is down 80% from the peak

Between May 2025 and February 2026, Estée Lauder’s share price was on a clear

recovery trajectory, supported by growing confidence in the success of its ‘Beauty

Reimagined’ turnaround strategy and improving operating momentum across the global

beauty market. More recently, however, the share price fell as investor sentiment

weakened, driven initially by concerns over the potential impact of the Middle East

conflict. However, this move was overdone in our view with the Middle East only 2% of

group revenues (including travel retail). This sell-off was exacerbated by a c.15% decline

in the three days following the confirmation of a potential merger with Puig. The

potential pivot in the Estee Lauder equity story from one which was supported by

improving beauty market back drop (especially in the China ecosystem) to one linked to

transformational M&A was not liked by the market. However, given the M&A is now off,