Earnings Analysis November 2, 2026

Estee Lauder Cos. Inc ($EL) Q1 FY2027 Earnings Analysis: Revenue and EPS Both Beat Estimates, Annual Guidance Raised

Earnings Report

Revenue: $3.715 billion (up 7% YoY, vs. expected $3.650 billion) ✅ Beat

EPS (Earnings Per Share): Adjusted $0.72 (vs. expected $0.50, GAAP $0.64) ✅ Beat

Guidance: Raised; FY2027 organic revenue growth 4.0~5.5%, adjusted EPS $3.20~3.45

Stock Reaction: -0.38% in regular session ($108.81, as of 11-03 00:16 KST)

Highlights

7% Revenue Growth: $3.715 billion, with growth across nearly all categories and regions

Margin Improvement: Adjusted operating margin 12.1%, up 4.8 percentage points from a year ago

Fragrance up 20%: Driven by luxury brands such as Le Labo and TOM FORD

The key takeaway for this quarter is that cost and operational efficiency programs boosted margins. As revenue growth absorbed cost burdens, adjusted operating income increased by 76% to $449 million.

Lowlights

Makeup up 1%: Dragged down by declining sales of face products within the Estee Lauder brand

Haircare stagnation: Shipments decreased due to supply chain logistics disruptions at Aveda

Free Cash Flow deficit: -$235 million in Q1, an improvement from -$436 million in the previous year

Makeup and haircare account for approximately one-third of total revenue but contributed almost nothing to growth this quarter. While both segments returned to operating profit, the pace of revenue recovery is slower than fragrance and skincare.

What the Company Said

CEO Stéphane de La Faverie assessed that growth is accelerating and profitability is improving significantly. The company stated that while it is raising its outlook, it maintains a cautious view regarding geopolitical and macro uncertainties.

Market Reaction and Future Key Points

Although both earnings and guidance exceeded expectations, the stock price fell 0.38% in regular trading to record $108.81. It is notable that while the company raised its guidance, it also maintained a cautious stance considering geopolitical and macroeconomic uncertainties.

A key point to monitor is whether the recovery in travel retail sales in mainland China and Hainan continues in the next quarter.

It remains to be seen whether the company's guidance, which suggests higher growth in the first half than the second half, is reflected in actual revenue.

The key factor is whether the makeup segment turns to growth on an annual basis.

Earnings Call Key Summary

We have summarized the key points from the Estee Lauder earnings call.

[Neutral] Slowdown in second-half growth: Although the company raised its annual guidance, new product launches are concentrated in the first half, and the second-half revenue base for airport duty-free is high compared to last year. Therefore, the pace of revenue growth in the second half may be slower than in the first half. Why UST viewed this as neutral: Because revenue growth could slow down in the second half. "As you may recall, I mentioned that the proportion of new products in total revenue will decrease in the second half. However, our plan to have new products account for 25% of annual revenue remains unchanged." (Estee Lauder CEO)

[Bearish] Increased freight and cost burdens: The deferred burdens of raw material prices and shipping costs (freight) will be more significantly reflected starting from the second half. The company explained that it has already factored these burdens into its annual guidance. Why UST viewed this as bearish: Because cost burdens such as freight will increase in the second half. "You are correct regarding the remainder of the year. The deferral of certain raw material-related costs will be more fully applied in the second half." (Estee Lauder CFO)

[Bullish] New products made in China: A significant portion of the company's total new products now comes from China. This allows for faster alignment with Chinese consumer preferences, serving as a strength to protect Chinese revenue and market share. Why UST viewed this as bullish: Because locally made products can respond more quickly to Chinese demand. "As I mentioned in our previous call, 30% of our new products worldwide now come from China. Some are exclusive to China, and some are made in China to be distributed globally." (Estee Lauder CFO)

[Bullish] Targeting fragrance prestige: In Western markets, fragrance revenue is still concentrated in the department store-centered mass-prestige (prestige) lines, where the company has not yet secured sufficient market share. This means they intend to fill this gap with new fragrances. Why UST viewed this as bullish: Because it is a price point with low market share, leaving room for growth. "On the other hand, in the West, most of our fragrance sales still come from the prestige price point, and we have not secured a fair share there over the past few years." (Estee Lauder CEO)