Goldman reinstates Estee Lauder rating, sees turnaround driving growth and margins

Investing.com -- Goldman Sachs reinstated coverage of The Estée Lauder Companies with a Buy rating and a $100 price target, arguing the beauty giant's turnaround is gaining traction and that investors are underestimating the durability of its sales and earnings recovery.

The brokerage said Estee Lauder has undergone significant changes since 2025, including a new leadership team, a revamped "Beauty Reimagined" strategy and a streamlined "One ELC" operating model. These initiatives have helped return the company to revenue growth in fiscal 2026 after three consecutive years of declines while driving more than 300 basis points of operating margin expansion year-to-date.

Goldman believes growth momentum can be sustained through stronger innovation, improving trends in China, a less volatile travel retail business and rising market share in developed markets. The bank also highlighted the attractiveness of the prestige beauty category, which it expects to deliver mid-single-digit long-term growth.

The firm forecasts revenue growth of 4.5% in fiscal 2026 and fiscal 2027, with earnings per share rising to $2.44 in fiscal 2026 from $1.51 a year earlier. It expects EBITDA and EPS to grow at compound annual rates of 18% and 40%, respectively, between calendar years 2025 and 2027.

Goldman also pointed to improving conditions in China, which accounted for 19% of fiscal 2025 sales. The company has gained market share in seven of the last eight quarters in the country and is benefiting from stronger performance across brands including MAC, Bobbi Brown, Jo Malone and Le Labo.

Meanwhile, travel retail exposure has fallen to 15% of sales from a peak of 29% in fiscal 2021, reducing a major source of earnings volatility. Goldman said improved conversion trends in Hainan and stronger Western travel-retail operations should support future growth.

On profitability, the bank expects expanded cost-cutting measures under the company's Profit Recovery and Growth Plan to support roughly 450 basis points of EBIT margin expansion through fiscal 2029. Management has increased targeted annual savings to $1.0 billion-$1.2 billion and widened planned workforce reductions to as many as 10,000 positions.

Goldman acknowledged risks including slower-than-expected market-share gains, weaker consumer demand, disruption in the Middle East and execution challenges. However, it said the stock's valuation remains attractive relative to historical averages and does not fully reflect the company's improving growth and margin outlook.

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