Analysis EL
Estée Lauder's profit upgrade gets a lift from an old investment
Beauty sales and margins improved. A completed acquisition also changes what the higher annual earnings target means.
Estée Lauder raised its annual earnings forecast after stronger beauty sales and margins. The upgrade also includes an expected $94 million gain from an investment it already owned, as the company takes full control of Forest Essentials.
The upgrade is larger before adjustments
Research by Ticker Byline shows that Estée Lauder raised each end of its fiscal 2027 reported earnings range by 33 cents a share from August. Its adjusted range rose by 10 cents.
| FY2027 EPS outlook | August 19 | November 2 |
|---|---|---|
| Reported, GAAP | $2.52 to $2.85 | $2.85 to $3.18 |
| Adjusted, non-GAAP | $3.10 to $3.35 | $3.20 to $3.45 |
The updated calculation removes a gain of 25 to 27 cents a share from revaluing the existing Forest Essentials stake. It also adds back a 10-cent expense for a separate payment connected with the deal. Lower expected restructuring charges explain another part of the difference between the two forecast increases.
Buying control changes the value of the old stake
On October 5, Estée Lauder paid $160 million for the remaining 51% of Mountain Valley Springs India, the owner of Forest Essentials. Taking control requires it to revalue the 49% it already held, creating the expected $94 million accounting gain. That gain brings in no new cash.
The company also made a separate one-time payment of $37 million connected with the acquisition, which will be recorded as an operating expense. Both the expense and the expected gain belong in the fiscal second quarter, after the September results just reported.
The business recovery is real too
In the three months ended September 30, 2026, sales rose 6.7% to $3.715 billion. Operating income increased to $408 million from $169 million. Adjusted operating margin, excluding restructuring and other charges, improved to 12.1% from 7.3%.
Estée Lauder attributed the improvement to cost savings, manufacturing efficiencies, pricing and higher sales. A lower tax rate also helped net earnings.
The company raised its annual operating cash flow forecast to $1.4 billion to $1.5 billion from $1.3 billion to $1.4 billion. Its September quarter still used $166 million of operating cash, less than the $340 million outflow a year earlier.
The Estée Lauder company profile tracks the completed acquisition, earlier targets and the latest sales, profit and cash figures.