Estee Lauder Shares Plunged: What You Need to Know


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of cosmetics giant Estee Lauder (NYS: EL) look tired today, falling as much as 12.6% on very heavy trading volume.

So what: The just-reported fourth quarter matched analyst expectations, but the share-price damage was dealt on the earnings call, when management discussed guidance in greater detail. Next-year earnings were outlined nearly 10% below analyst estimates, and the company would need to deliver sales at the top of its guidance range in order to meet existing Street targets.

Now what: Investors see Estee Lauder's troubles largely contained to the company itself and not spilling over into the larger cosmetics sector. Avon Products (NYS: AVP) and Revlon (NYS: REV) are happily trading up with the overall market while Elizabeth Arden (NAS: RDEN) is taking an even bigger upwards leap.

But that might not be entirely fair. The lack of revenue ambition is made up for by higher margin goals, and the company is also a victim of currency effects that are outside management's control. Still, that one-star CAPS rating says that the stock is overvalued today, as is the entire beauty-specialty sector. Fool Selena Maranjian can show you a handful of better-looking investments in makeup and personal care.

Interested in more info on Estee Lauder? Add it to your watchlist.

At the time thisarticle was published Fool contributor Anders Bylund holds no position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.

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