We’re buying 20 shares of Estee Lauder (EL) at roughly $248.20 each. Following Friday’s trade, Jim Cramer’s Charitable Trust will own 270 shares of EL, increasing its weighting in the portfolio to 2.26% about from 2.1% Estee Lauder ‘s stock is having a tough February. Shares have fallen roughly 11% since the start of the month, and it has been almost straight lower from $280 ever since the company reported fiscal second quarter earnings . That’s kind of how Estee Lauder has traded of late. It went straight down from $280 in August to the $180s at the end of October with little reprieve in-between on concerns about new Covid lockdowns in China. Then, it rallied straight up from there through the end of the year after China reversed course and moved away from its stringent zero-Covid policy. EL 1Y mountain Estee Lauder (EL) 1-year performance The quarter for this leader in prestige beauty was solid, and earnings handily beat expectations, with the company posting adjusted earnings per share (EPS) of $1.69 versus estimates of $1.29. Although high-margin areas of its business such as skin care and travel retail remained depressed due to shutdowns in China, strong expense control and easing pressures from foreign exchange (forex) fluctuations helped it deliver a solid number . We weren’t completely surprised to see management report a big beat. This management team, led by the thoughtful CEO Fabrizio Freda, often keeps expectations conservative quarter to quarter and then crushes them — the “under promise, over deliver” style we love to see from executive teams. However, when management slashed its full-year outlook and provided a weak view for its current third quarter — adjusted EPS of 37 to 47 cents versus estimates of $1.78 — investors were quick to ring the register because Estee Lauder’s return to annual EPS growth was pushed out one quarter. The reasons behind the disappointing forecast were two-fold: a slower-than-expected normalization of inventory levels in the popular Chinese tourist destination of Hainan and a potential rollback of Covid-related supportive measures in Korea duty-free. We can’t fault anyone who wanted to take the gain after Estee Lauder’s nearly 50% rise since the start of November into the new year. We booked double-digit profits in the high $260s in early January. Looking at the stock now, it has erased all its year-to-date gains and it’s trading almost 6% below our recent sale. Estee Lauder’s business may be going through one final soft patch right now, but we haven’t lost faith in the China reopening and all that pent-up demand from people wanting to travel. With the issues plaguing the company only expected to be temporary, we think this recent weakness represents a buying opportunity. We’re upgrading our rating back to a 1 and repurchasing half of the 40 shares we sold one month ago. (Jim Cramer’s Charitable Trust is long EL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Source: Business - cnbc.com
