Analysis EL
Estée Lauder's profit upgrade gets a lift from an old investment
Estée Lauder raised its annual outlook. Comparing the old and new forecasts shows how business recovery and a Forest Essentials accounting gain contribute.
Ticker Byline
The Estée Lauder Companies Inc.
Estée Lauder has raised its annual sales, margin and earnings outlook after stronger quarterly results, while the reported profit forecast also includes Forest Essentials acquisition accounting.
- Ticker
- EL
- Exchange
- XNYS
- SEC CIK
- 0001001250
The Estée Lauder Companies (NYSE: EL) sells skin care, makeup, fragrance and hair care through brands including Estée Lauder, Clinique, M·A·C, La Mer and The Ordinary. Its fiscal year ends June 30.
Recovery in the September quarter
The table covers fiscal Q1 2027 and Q1 2026, the three months ended September 30 in the stated calendar years. Amounts are USD millions.
| GAAP results | 2026 | 2025 |
|---|---|---|
| Net sales | 3,715 | 3,481 |
| Operating income | 408 | 169 |
| Net earnings attributable to Estée Lauder | 233 | 47 |
| Operating cash flow | -166 | -340 |
Adjusted operating margin rose to 12.1% from 7.3%, excluding restructuring and other charges. Management cited cost savings, operating efficiencies, pricing and sales growth. A lower tax rate also supported net earnings.
Annual targets raised from August
On November 2, the company raised its fiscal 2027 adjusted EPS forecast to $3.20 to $3.45 from $3.10 to $3.35. Its adjusted operating margin target rose to 12.9% to 13.7% from 12.7% to 13.5%. These measures exclude restructuring and other specified items.
Reported EPS guidance rose to $2.85 to $3.18 from $2.52 to $2.85. That increase also reflects an expected gain from revaluing the earlier Forest Essentials investment, a separate deal expense and lower expected restructuring charges.
Forest Essentials purchase is complete
On October 5, Estée Lauder completed the purchase of the remaining 51% of Forest Essentials’ owner for $160 million in cash, subject to adjustments. It also made a separate one-time payment of $37 million connected with the acquisition, which will be expensed in fiscal Q2 2027.
Remeasuring the previously owned 49% stake is expected to create a $94 million noncash gain in that quarter. The brand’s operating results are not expected to have a material effect on fiscal 2027 sales or EPS.
Cash and debt
September 30 cash was $3.20 billion, before the October acquisition payments. Current debt was $503 million and long-term debt $6.748 billion, including finance leases.
The annual operating cash flow target rose to $1.4 billion to $1.5 billion from $1.3 billion to $1.4 billion. The company still expects less operating cash than in fiscal 2026 because of higher restructuring payments and working capital needs.
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