Personal care products maker Estee Lauder Companies Inc. (EL) reported Friday a higher profit for its third quarter, above Street estimates, as improved performance by skin care products boosted its revenues. Looking ahead, the company said its outlook for the balance of the year remains positive and lifted fiscal 2012 forecast, but sees fourth-quarter earnings below estimates.
The manufacturer of skin care, makeup, fragrance and hair care products reported that third-quarter net earnings attributable to the company increased 5 percent to $130.4 million from $124.7 million a year ago. Earnings per share rose 6 percent to $0.33.
The latest quarter results included charges associated with restructuring activities of $18.8 million or $0.05 per share, while prior year's results included charges of $17.9 million or $0.04 per share.
Excluding these returns and charges, net earnings rose 5 percent to $149.2 million and earnings per share grew 7 percent to $0.38.
On average, 17 analysts polled by Thomson Reuters expected the company to earn $0.33 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter grew 4 percent to $2.25 billion from $2.17 billion in the previous year, and were in line with Wall Street analysts' consensus. Excluding the impact of foreign currency translation, net sales increased 5 percent.
The results were unfavorably impacted by the shifts in orders from certain retailers due to the company's implementation of SAP in certain product categories in various geographic locations.
Excluding this impact, sales would have increased 9 percent in local currency, "which speaks to the strength of our underlying business," the company noted.
Estee Lauder attributed the performance to solid overall business, particularly from its largest brands. The company generated sales gains in every region. Net sales from skin care, a strategic priority for the company, grew 9 percent to $1.02 billion.
Net sales from makeup and fragrance decreased less than 1 percent and hair care products increased less than 1 percent with mixed performance in each region.
In Europe, the Middle East & Africa, the company said it believes it is outpacing its competitors, and continued to generate solid growth in a soft market despite economic uncertainties in Europe.
Gross profit increased 6 percent and gross margin expanded 140 basis points to 79.1 percent, while operating margin remained unchanged, before restructuring charges.
For the fourth quarter, the company expects net earnings to be $0.10 to $0.15 per share and adjusted net earnings to be $0.11 to $0.16 per share. Net sales would increase between 10 percent and 11 percent in constant currency. Analysts expect the company to earn $0.20 per share on revenues of $2.19 billion for the quarter.
For the full year, Estée Lauder currently projects net earnings to be $2.14 to $2.19 per share and adjusted net earnings to be $2.21 to $2.26 per share. Net sales are expected to grow approximately 10 percent in constant currency. Analysts expect the company to earn $2.24 per share on revenues of $9.65 billion for the year.
The company's previous earnings forecast was between $2.09 and $2.19 per share and adjusted earnings between $2.16 and $2.23 per share on a net sales growth of 9 to 10 percent.
Estee Lauder shares are currently trading at $61.85, down $2.30 or 3.59 percent.
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