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Estee Lauder makes FQ4 look good

 

Friday, August 19, 2022

The news shaping the markets today

UN Secretary-General Antonio Guterres called for the demilitarisation of the Ukrainian nuclear power plant held by Russia in the southern Zaporizhzhia area. WTI crude oil futures traded lower this morning.


Japan’s annual inflation rate accelerated to 2.6% in July, from 2.4% in the previous month. The country’s consumer prices rising for the 11th straight month exerted pressure on the JPY/USD forex pair.


UK’s GfK consumer confidence indicator fell to -44 in August, from -41 in the prior month. The index dipped to a new record low, sending the GBP/USD pair lower in forex trading this morning.


Indonesia recorded a current account surplus of $3.85 billion in the second quarter, versus a year-ago deficit of $1.93 billion. Despite this being the fourth straight quarter of surplus on the current account, the IDR/USD forex pair remained under pressure.


Canada’s producer prices fell 2.1% in July, versus a 0.8% decline a month ago. However, the CAD/USD pair fell slightly in forex trading this morning.

 

What’s happening: Shares of Estee Lauder Companies Inc gained on Thursday, after the company reported better-than-expected results for its fiscal fourth quarter.

What happened: Despite the better quarterly results, Estee Lauder recorded a double-digit decline in the sales from one of its major regions.

The New York-based company also issued a downbeat forecast, citing the Russia-Ukraine war and the impact of the US dollar strength on foreign revenue conversion.

How were the results: The beauty company reported a decline in sales for the fourth quarter, but both top- and bottom-line figures exceeded market views.

  • Revenues declined by 10% year-over-year to $3.56 billion, but surpassed the consensus estimate of $3.43 billion.
  • Adjusted earnings came in at 42 cents per share, ahead of the Street expectations of 34 cents per share.

Why it matters: Estee Lauder’s worldwide business remained impacted by the covid-19 pandemic during the fiscal year ended June 30, 2022. Tight restrictions in China negatively impacted growth at the company, which generally accounts for almost one-third of overall sales.

The company’s sales in the Americas grew 12% from a year ago, while sales in Asia/Pacific declined 23% during the quarter.

Net sales from Skin Care fell 21%, while sales from Makeup, Fragrance, and Hair Care grew 3%, 16% and 2%, respectively.

The company’s gross margins shrank 390 basis points to 71% and operating expenses fell 10% year-over-year to $2.5 billion.

Estee Lauder projected net sales growth of 3%-5% and adjusted earnings of $7.39-$7.54 per share for fiscal 2023, which came is short of the consensus estimate of $7.99 per share.

Management guided to a decline in net sales for the current quarter, with adjusted earnings of $1.22-$1.32 per share, versus market expectations of $1.88 per share.

How shares responded: Estee Lauder’s shares gained 1.8% to close at $281.62 on Thursday, following the release of quarterly results. The stock has added around 10% over the past month.

What to watch: Investors will keep an eye on the lockdown situation in China as well as movements in the US dollar.

The markets today

UK stocks will be in focus today ahead of a couple of major economic reports from the country

Context: London stocks managed to finish in the green zone amid a volatile trading session on Thursday.

Details: Investors assessed the release of economic reports, with the Eurozone’s annual inflation rate surging to a new record high of 8.9% in July, from 8.6% in the previous month.

Recently released data from the UK also showed the annual inflation rate rising to a fresh 40-year high of 10.1% in July, significantly above market estimates. The release fuelled concerns of the Bank of England continuing its aggressive policy tightening measures.

The UK’s central bank recently announced its biggest rate hike in 27 years to control high inflation in the country, increasing rates by 50 basis points to 1.75%.

However, the inflation news supported commodity stocks, while investors also added high dividend paying stocks to their portfolio.

London’s FTSE 100 rose 0.35% to close at 7,541.85 on Thursday, with shares of Antofagasta and Prudential recording the biggest gains on the index. The FTSE 250 added 0.55% to reach 20,136.65.

Shares of Helios Towers PLC rose around 2.6%, after the company reported an increase in first-half earnings and backed its full-year guidance. AO World’s stock gained over 10%, despite the company reporting a loss for the full year.

The British pound remained under pressure, declining around 1% against the US dollar, to settle at 1.1931 on Thursday.

What to watch: Traders await the release of economic data on retail sales and public sector net borrowing from the UK today. Retail sales in the UK, which declined 0.1% in June, is expected to contract again by 0.1% in July.

Other Markets: US trading indices closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.06%, 0.23% and 0.26%, respectively.

Support & resistances for today

Technical Levels News Sentiment
AUD/USD – 0.6915 and 0.6918 Positive
EUR/GBP – 0.8458 and 0.8461 Positive
Silver – 19.310 and 19.365 Positive
Copper – 3.6359 and 3.6609 Positive
CAC 40 – 6543.90 and 6560.99 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0080, -0.08%) Dow ($33,953, -0.08%) Brent ($96.23, -0.4%)
GBP/USD (1.1917, -0.12%) S&P500 ($4,281, -0.12%) WTI ($90.19, -0.3%)
USD/JPY (136.29, 0.29%) Nasdaq ($13,507, -0.12%) Gold ($1,768, -0.2%)

What else to watch today

Germany’s producer price inflation, Indonesia’s loan growth, Eurozone’s current account, Italy’s current account, Mexico’s retail sales, India’s foreign exchange reserves, Canada’s retail sales, US Baker Hughes crude oil rigs, as well as Argentina’s leading economic index.


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