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Can Billionaire Nelson Peltz Save Estee Lauder (EL) Stock?


  • Nelson Peltz said he is targeting Estee Lauder (EL) after disappointing earnings.
  • CEO Fabrizio Freda blamed slow sales in Asia, while Peltz wants costs cut and possibly a sale to LVMH (LVMUY).
  • Institutions may have recruited Peltz to pressure the Lauder family, who control voting shares.
EL stock - Can Billionaire Nelson Peltz Save Estee Lauder (EL) Stock?

Source: Sorbis / Shutterstock.com

Estee Lauder (NYSE:EL) stock rose over 5% after activist investor Nelson Peltz said he is targeting the makeup company.

The stock is down 18% for the year after reporting lower revenue and sharply lower earnings for the quarter ending in March. Estee Lauder earned $156 million, 43 cents per share, on revenue of $3.75 billion. Sales were down 12%, but earnings were down by two-thirds from a year ago. Earnings also fell below analysts’ expectations. Management reduced its earnings guidance for the rest of the year.

Shares opened this morning, May 8, at about $207 each, a market capitalization of $75 billion. A 66-cent/share dividend is still due to shareholders of record on May 30.

Peltz’s Plan

According to the New York Post, Peltz’s initial plan may be to oust CEO Fabrizio Freda and cut costs at the cosmetics giant. Freda has been the company’s CEO since 2009.

Peltz, who has not said that he has bought any shares, may also want to put the company in play for LVMH (OTCMKTS:LVMUY), the luxury conglomerate that has previously signaled interest in it. The Lauder family controls Estee Lauder with 86% of the voting shares and 38% of the common. Like many companies, Estee Lauder has a dual-share structure aimed at thwarting takeovers.

The biggest institutional holders of Estee Lauder stock are Vanguard, Blackrock (NYSE:BLK), State Street (NYSE:STT) and Morgan Stanley (NYSE:MS). It’s believed the institutions may have recruited Peltz to put pressure on the family.

Peltz attacked Disney (NYSE:DIS) last year over its strategy but backed off after returning CEO Bob Iger announced a reorganization plan in February.

Estee Lauder has been having problems with both its supply chain and sales in Asia. The share price collapse following earnings was the largest on record for the stock.

EL Stock: What Happens Next?

Freda insists he has an inventory issue, primarily in Korea and China. Peltz says the problem is costs, which he wants to see cut. What matters more is what the family thinks.

On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.

Article printed from InvestorPlace Media, https://investorplace.com/2023/05/can-billionaire-nelson-peltz-save-estee-lauder-el-stock/.

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