Earnings call transcript: Estée Lauder Q3 2026 beats forecasts, stock surges

Estée Lauder Companies Inc. reported its fiscal third-quarter 2026 earnings, surpassing Wall Street expectations with a notable earnings per share (EPS) of $0.91, compared to the forecasted $0.65. The company also exceeded revenue projections, reporting $3.71 billion against the anticipated $3.69 billion. This performance led to a pre-market stock surge of 12.76%, with shares reaching $86.50, reflecting strong investor confidence in the company’s strategic initiatives and market positioning.

Estée Lauder’s third-quarter performance demonstrated resilience and strategic growth, driven by double-digit gains in the fragrance sector across all regions. The company’s gross margin expanded to 76.4%, a 140-basis-point improvement from the previous year, showcasing effective execution of its Profit Recovery and Growth Plan (PRGP). This aligns with what InvestingPro identifies as one of the company’s key strengths: impressive gross profit margins, with the last twelve months showing a 74.3% gross profit margin. Despite disruptions in the Middle East, the company maintained robust sales growth.

Estée Lauder reported a 40% EPS surprise, with actual earnings of $0.91 against a forecast of $0.65. Revenue also slightly exceeded expectations, coming in at $3.71 billion compared to the projected $3.69 billion. This marks a significant beat, highlighting the company’s effective cost management and sales leverage.

Following the earnings announcement, Estée Lauder’s stock experienced a substantial pre-market increase of 12.76%, reaching $86.50. This surge reflects investor optimism and confidence in the company’s strategic direction and financial health, especially given the stock’s recovery from its 52-week low of $56.66. According to InvestingPro analysis, the stock appears undervalued at current levels based on the platform’s Fair Value calculation, suggesting potential upside for investors. The company is featured among most undervalued stocks tracked by the platform.

Looking forward, Estée Lauder anticipates continued growth, with EPS forecasts for upcoming quarters reflecting steady increases. Analysts project EPS of $2.24 for fiscal 2026, and InvestingPro Tips indicate that net income is expected to grow this year, supporting the positive outlook. The company is focused on expanding its fragrance and skincare lines while optimizing its channel presence, particularly online. Strategic acquisitions and investments, such as the Forest Essentials and 111SKIN, are expected to bolster future growth. For investors seeking deeper insights, Estée Lauder is one of 1,400+ US equities covered by comprehensive Pro Research Reports, which transform complex Wall Street data into clear, actionable intelligence.

Fabrizio Freda, CEO of Estée Lauder, stated, "Our strong third-quarter results underscore the success of our strategic initiatives and the resilience of our brands. We continue to invest in high-growth areas and optimize our operations to drive long-term value for our shareholders."

During the earnings call, analysts questioned the impact of geopolitical tensions on sales and the company’s strategy to mitigate these risks. Executives highlighted their focus on diversifying market presence and enhancing operational efficiencies to counteract potential headwinds.

Operator: Good day, everyone, and welcome to the Estée Lauder Companies Fiscal 2026 third quarter conference call. Today’s webcast is being recorded. For opening remarks and introductions, I would like to turn the call over to the Senior Vice President of Investor Relations, Ms. Rainey Mancini.

Rainey Mancini, Senior Vice President of Investor Relations, Estée Lauder Companies: Hello. On today’s webcast are Stéphane de La Faverie, President and Chief Executive Officer, and Akhil Shrivastava, Executive Vice President and Chief Financial Officer. Since many of our remarks today contain forward-looking statements, let me refer you to our press release and our reports filed with the SEC, where you will find factors that could cause actual results to differ materially from these forward-looking statements. To facilitate the discussion of our underlying business, the commentary on our financial results and expectations is before restructuring and other charges and adjustments disclosed in our press release. Unless otherwise stated, all organic net sales growth also excludes the non-comparable impacts of acquisitions, divestitures, brand closures, and the impact of foreign currency translation. You can find reconciliations between GAAP and non-GAAP measures in our press release and on the investor section of our website.

Retail sales performance discussed is based on information available as of April 29th, 2026. As a reminder, references to online sales include sales we make directly to our consumers through our brand.com sites and through third-party platforms. It also includes estimated sales of our products through our retailers’ websites. Throughout our presentation, our Profit Recovery and Growth Plan will be referred to as our PRGP. Now I’ll turn the webcast over to Stéphane.

Stéphane de La Faverie, President and Chief Executive Officer, Estée Lauder Companies: Thank you, Rainey, and hello to everyone. Today, we raised our fiscal 2026 outlook and offered our preliminary view on fiscal 2027. We do so with confidence in the trajectory of our business as our third quarter result extend our strong year-to-date performance and as we begin realizing the benefit of one operating ecosystem. For the third quarter, organic sales rose 2%. Operating margin expanded significantly, bolstered in part by gross margin expansion. EPS grew 40%, further demonstrating the momentum of Beauty Reimagined. For the nine months of fiscal 2026, we have delivered progress in many areas of our business. 3 of 4 region grew organically, led by high single-digit growth in mainland China and double-digit growth in our priority emerging markets. The Americas stabilized. We remain focused on seizing its full potential.

Looking at categories, fiscal year to date, Fragrance rose double-digit organically, significantly outperforming the industry, and skincare grew low single-digits, while hair care stabilized and makeup rate of decline slowed. Fiscal 2026 is promising to be the pivotal year we intended, one in which we restore organic sales growth and expand our operating margin for the first time in four years. We now expect to deliver organic sales growth of 3%, the high end of our prior range. Operating margin on track to be 10.7%-11%, significantly ahead of the 10% we previously expected at the midpoint, and notably better than the 8% of fiscal 2025. Driving these results and expectation are retail sales growth and share gain in several key markets.

In mainland China, with our high single-digit retail sales growth, we estimate we outperformed prestige beauty for the third consecutive quarter of fiscal 2026, driven by brands including La Mer, Tom Ford, Le Labo, and The Ordinary. For travel retail in Hainan, we significantly outperformed prestige beauty, which itself improved sequentially to gain share as our activation for Lunar New Year drove remarkable performance. Retail sales rose strong double digit, accelerating from high single digit in the second quarter, with 10 brand growing double digit led by La Mer, Estée Lauder, and M·A·C. In Japan, where prestige beauty decline low single digit, our share expanded overall, driven by outperformance in makeup. In Korea, we returned to retail sales growth up high single digits and gained share in makeup. In both market, M·A·C performed exceptionally well. In the U.S., our retail sales grew mid-single digit.

We gained volume share in total prestige beauty driven by every category. On a value basis, The Ordinary gained share in skincare while Clinique, M·A·C, Bobbi Brown Cosmetics, and Estée Lauder expanded share in makeup. The company gained value share in the U.S. prestige hair care, driven by Aveda and The Ordinary, and we are seeing evidence of Aveda’s turnaround given share expansion tracks salon data. These retail sales and share trend around the world are a tribute to our team’s delivery of Beauty Reimagined. During the third quarter, we continued to execute with excellence across all five action plan priorities. We accelerated best-in-class consumer coverage, expanding our portfolio presence in consumer preferred high-growth channels, market, media, and price tiers. For Amazon premium beauty stores, we deepened brand reach across the 10 markets where we have launched. For instance, with Clinique launching in France and Estée Lauder in the U.K.

Similarly, we increased our brand reach on TikTok Shop in market from the U.S. to Germany and Malaysia, and enhanced our online presence in China, launching The Ordinary on Douyin, and Estée Lauder and M·A·C on VIP.com. This work, coupled with strong performance on Douyin, Tmall and Coupang, one of the leading Korean online platforms, drove double-digit online organic sales growth in the third quarter. Impressively, fiscal year to date, online organic sales growth grew 10%, leading us to believe we outperform prestige beauty in the channel. In March, we strengthened our ties in specialty multis with M·A·C’s much-anticipated entry into the U.S. Sephora. For the month, M·A·C was the number 1 lip brand in makeup across the Sephora stores where it launched. For our second action plan priority, Create Transformative Innovation, we deliver on all three areas of breakthrough, on-trend, and commercial.

Our newness in Fragrance resonated especially well, contributed to the category’s double-digit organic sales growth, driven by every region. Le Labo delivered another quarter of remarkable growth, with high single-digit like-for-like door growth and strong double-digit organic sales growth, driven in part by Violette 30, a recent addition to the classic collection. Tom Ford’s innovation in the category went from s