Estée Lauder beats Q1 estimates and raises fiscal 2027 outlook as fragrance sales climb 20%

EL opened its fiscal 2027 with a clear beat. Net sales for the first quarter rose 7% to $3.715 billion, and organic sales, which strip out currency and portfolio changes, grew 6%, with every region growing year over year according to the company. Adjusted EPS came in at $0.72, well ahead of the $0.51 consensus and up from $0.32 a year earlier. On a reported basis, diluted EPS was $0.64 against $0.13, and operating income more than doubled to $408 million as costs barely grew while sales did, from $169 million a year earlier.

Fragrance did the heavy lifting. The category grew 20% organically and earned the best operating margin of the company's four categories, so its growth lifted profitability as well as sales. Gross margin widened to 75.7% from 73.4%, and the reported operating margin rose to 11% from 4.9%.

Management raised every line of its fiscal 2027 outlook. It now expects organic sales growth of 4% to 5.5%, up from 3% to 5%, adjusted EPS of $3.20 to $3.45, up from $3.10 to $3.35, and an adjusted operating margin of 12.9% to 13.7%, up from 12.7% to 13.5%. The Motley Fool noted that the raised sales range still sits below the first quarter's 6% organic pace, which implies slower growth over the rest of the year.

The stock reaction was positive but faded. Yahoo Finance reported shares up 5.2% in early premarket trading, while a later premarket roundup had the gain at about 2.4%. Goldman Sachs analyst Bonnie Herzog raised her price target to $129 from $124 and kept a Conviction Buy rating, according to Investing.com. The quarter also follows the company's October 30 announcement of a new strategic partnership with MSFT on cloud, data and AI capabilities. The things to watch are whether fragrance momentum carries into the holiday quarter and whether the organic pace holds above the guided range.