The brokerage pointed out that the company has already achieved most of the expected key metrics like revenue, margins and market share growth reflecting its heavy investments in the recent past. Therefore, the analyst believes shares are fairly valued based on its revised EPS estimate for the year 2017.
Argus reduced its EPS estimate from $3.70 to $3.56 for the year 2017 to reflect the company's downbeat outlook. For the year 2018, the analyst established an EPS estimate of $4.05. Staszak thinks there is no change in Estee Lauder's earnings growth pace of 14 percent in the long term.
"We also believe that further market share gains will be difficult to achieve given challenging economic conditions, increased competition, and slower growth in the premium beauty products segment," the analyst told clients in a research note.
The brokerage would be ready to revisit the rating of the shares if the company could reaccelerate its earnings.
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