Morgan Stanley expects strong Estee Lauder earnings, adds to catalyst watch

Investing.com -- Morgan Stanley has upgraded Estée Lauder to Overweight and placed the cosmetics group on its Positive Catalyst Watch, ahead of its fourth-quarter earnings release on August 20.

The firm expects the company to deliver a revenue beat and laid out a constructive multiyear thesis for the stock.

“We believe EL will deliver at the top of their guide given the better-than-feared 6.18 event and better performance online,” Morgan Stanley analysts wrote, adding that like-for-like sales could “inflect positive (+0.9% globally) in the upcoming December 2025 quarter.”

The firm said retail destocking is likely behind the company, and the full benefits of Estée Lauder’s Profit Recovery and Growth Plan (PRGP) will begin to materialize in fiscal 2027.

“There is upside to EPS when the PRGP savings kick in in FY27,” Morgan Stanley said.

The analysts also noted improving margins, citing a five consecutive quarter expansion of gross margin. Estée Lauder’s EBITDA margin was 15.5% in fiscal 2024, and Morgan Stanley projects that will rise to 17.7% in FY27.

Operational improvements and reinvestment into digital are also said to support the positive view.

“Management called out a clear example of operational improvement, quoting [a] ten-point improvement in forecasting accuracy, reducing excess and obsolescence by 50%,” the note said.

The bank noted that Estée Lauder recently hired its first-ever Chief Digital and Marketing Officer, Aude Gandon, to accelerate online performance.

Morgan Stanley has raised its earnings estimates across FY26–FY28 and expects adjusted EPS of $2.27 in FY26 and $3.41 in FY27.

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