Estee Lauder Stock (EL) Rallying Ahead of Earnings – Can The Momentum Continue?

Estée Lauder reports fiscal Q2 2026 this morning before market open. The Estee Lauder stock price (NYSE:EL) has added 12% since the start of the year, propelling the name to highs above $120, and gains of 81% on a 1 year basis. Expectations are heightened no doubt, but can the company continue to beat the street?

Consensus sits at $0.83 adjusted EPS and $4.24B revenue, representing 34% and 6% year-over-year growth respectively, but the stock trades 8% above the analyst consensus target of $109.75, creating a valuation setup where execution must exceed rather than merely meet expectations.

The estimate positioning reflects an unusual tension: the stock has surged 81% over the past year from its April 2025 low of $48, yet 23 of 27 analysts maintain Hold ratings and the consensus price target implies downside from current levels.

This disconnect stems from the market pricing recovery momentum while sell-side models remain anchored to the company’s annual-only guidance framework, which provides limited quarterly visibility.

Management reaffirmed its FY2026 adjusted EPS range of $1.90 to $2.10 (midpoint $2.00) in October, and the $0.83 consensus for Q2 would require a significant acceleration in the back half to reach even the low end of that range.

The quarter will determine whether fragrance-led growth and PRGP cost savings can offset persistent weakness in Asia travel retail and China, or whether the stock’s rally has outpaced fundamental improvement.

With the company having beaten adjusted EPS estimates by an average of 83% over the past four quarters yet frequently selling off on guidance concerns, the forward commentary on travel retail normalization and margin trajectory matters more than the reported numbers.

Consensus Estimates

The consensus setup reflects modest upward revision momentum, with five analysts raising estimates over the past 30 days and the EPS figure moving 1 cent higher to $0.83. The 34.7% year-over-year EPS growth compares against an easy prior-year comparison when Q2 FY2025 delivered $0.62 adjusted EPS, a result that beat the $0.31 estimate by 100% yet triggered a 19% single-day stock decline as management guided Q3 to $0.20-$0.30, well below expectations. The revenue estimate of $4.24B sits in the middle of the $4.18B-$4.31B range, suggesting limited conviction on either upside or downside scenarios.

The absence of quarterly guidance complicates the estimate framework. Management shifted to annual-only outlooks beginning with FY2026, establishing a $1.90-$2.10 adjusted EPS range (midpoint $2.00) and net sales decline of 1% to flat. At $0.83 for Q2, consensus implies roughly $0.35 for the remaining two quarters combined to reach the $2.00 midpoint, a cadence that would require either significant Q2 outperformance or a sharp acceleration in Q3-Q4. The estimate range width of $0.73 to $1.05 (44% spread) underscores low visibility on margin conversion and promotional intensity.

Management Guidance and Commentary

“We are making good progress on our turnaround, and I am encouraged by the sequential improvement we are seeing across key markets. Our Profit Recovery and Growth Plan is delivering results, with targeted cost reductions supporting our ability to invest behind our brands while improving profitability.”

Management’s October 2025 commentary emphasized fragrance strength and improving China trends as the primary drivers of Q1’s adjusted EPS beat ($0.32 vs $0.18 estimate). The company reaffirmed its FY2026 annual outlook of $1.90-$2.10 adjusted EPS and net sales down 1% to flat, but provided no quarterly cadence or segment-level guidance. This framework shifts the analytical burden to investors, who must triangulate quarterly expectations from qualitative signals about travel retail shipment patterns, China conversion rates, and PRGP savings realization.

The guidance gap versus consensus is structural rather than numerical. The $2.00 midpoint for FY2026 implies approximately $0.35 per quarter for Q3 and Q4 if Q2 delivers $0.83, yet management has not confirmed this trajectory. The August 2025 introduction of annual-only guidance followed a period when quarterly outlooks repeatedly disappointed: February’s Q3 guide of $0.20-$0.30 (midpoint $0.25) came in far below what investors had modeled, and the stock’s 19% drawdown reflected a wholesale re-rating of near-term earnings power. The current setup creates asymmetric risk: a beat on $0.83 may not lift the stock if management declines to raise the annual range or signals back-half headwinds, while a miss would likely trigger questions about whether the $1.90-$2.10 range remains achievable.

Analyst Price Targets & Ratings

Wall Street remains cautious, with 85% of analysts rating shares a Hold. The consensus target of $109.75 implies 8.2% downside from current levels, reflecting skepticism about whether the turnaround can sustain momentum at current valuations. Only 4 of 27 analysts rate the stock a Buy or Strong Buy, highlighting the disconnect between market pricing and sell-side conviction.

Sector & Peer Comparison

Estée Lauder trades at a 54.9x forward P/E despite negative trailing profit margins, a valuation that prices recovery expectations rather than current fundamentals. The forward multiple sits well above L’Oréal’s 28.4x and Coty’s 18.2x, yet those peers generate positive operating margins and more stable growth trajectories. The comparison to e.l.f. Beauty is instructive: ELF trades at 42.1x forward earnings with 12.8% profit margins and consistent double-digit growth, suggesting the market assigns EL a premium based on brand portfolio quality and turnaround optionality rather than near-term profitability.

Fragrance category strength has been a consistent bright spot in recent quarters

Earnings Track Record

Estée Lauder has beaten adjusted EPS estimates in 17 of the past 20 quarters, with an 85% beat rate and average surprise of 47.6%. The past four quarters show particularly large beats: Q2 FY2025 delivered $0.62 vs $0.32 estimate (+94%), Q3 came in at $0.65 vs $0.31 (+109%), and Q1 FY2026 reported $0.32 vs $0.18 (+39%). This pattern reflects the Street consistently underestimating PRGP cost savings and gross margin resilience, even as revenue has remained under pressure.

Post-Earnings Price Movement History

The average next-day move of +0.8% masks significant volatility in individual reactions, with recent quarters showing that guidance commentary drives price action more than reported results. The September 2025 quarter delivered a 38.5% EPS beat yet fell 3.3% the next day, while the June quarter’s modest 8.7% beat rallied 6.3%. The pattern suggests investors trade the forward outlook rather than backward-looking numbers.

Expected Move & Implied Volatility

The options market prices a ±6.5% move, significantly above the +0.8% average historical next-day reaction and the +3.7% median move. This elevated expectation reflects several factors: the stock’s 84% rally over the past year creates potential for profit-taking on any disappointment, the 8% premium to analyst price targets introduces downside risk if results fail to justify the valuation, and the lack of quarterly guidance amplifies uncertainty about the FY2026 earnings trajectory.

Management commentary on travel retail and margin trajectory will drive stock reaction

Expert Predictions & What to Watch

Key Outlook: Cautiously Bullish with Execution Risk

The base case assumes Estée Lauder delivers adjusted EPS in the $0.85-$0.90 range, modestly above the $0.83 consensus, driven by continued fragrance strength and PRGP margin benefits. Revenue likely comes in at $4.25B-$4.28B, slightly ahead of the $4.24B estimate, reflecting sequential stabilization in most markets offset by ongoing Asia travel retail weakness. The critical variable is management’s tone on the back half of FY2026: if the company signals confidence in reaching the $2.00-$2.10 range without incremental promotional intensity, the stock can sustain its premium valuation.

Key Metrics to Watch

The quarter’s outcome hinges on whether management can credibly argue that the margin expansion path is firming and that travel retail normalization is progressing, even if slowly. The high probability of an EPS beat (given the 83% historical rate and recent upward estimate revisions) is largely priced into the stock’s 84% rally from April lows. What is not priced is visibility into the back half of FY2026 and whether the $1.90-$2.10 guidance range can be achieved without incremental promotional spending or tariff-related margin pressure.

The watchlist prioritizes metrics that address the key uncertainties: travel retail inflection, fragrance sustainability, margin trajectory, China demand quality, and guidance confidence. A scenario where all five metrics land positively would support the bull case target of $145-$150, while disappointment on two or more would likely push the stock toward the $95-$100 bear case range given the current valuation premium.