What Happened?
Shares of beauty products company Estée Lauder (NYSE: EL) jumped 3.2% in the morning session after the release of a favorable Consumer Price Index (CPI) report showed inflation cooling more than anticipated. The July report from the Bureau of Labor Statistics indicated a year-over-year inflation rate of 2.7%, just below the 2.8% economists had forecast. This suggests that price pressures on consumers may be easing. Particularly beneficial for the sector was the news that the food index remained flat, with grocery prices even declining by 0.1% month-over-month. This development is seen as a positive for the profitability of food, beverage, and personal care companies, as lower input costs and increased consumer purchasing power could boost sales. A Federal Reserve official's comments on the same day, noting that consumer spending fundamentals remain solid, further bolstered investor confidence in the sector's resilience.
After the initial pop the shares cooled down to $91.26, up 2.4% from previous close.
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What Is The Market Telling Us
Estée Lauder’s shares are very volatile and have had 20 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 18 days ago when the stock gained 4.1% on the news that JPMorgan upgraded the stock from "Neutral" to "Overweight" and significantly raised its price target. The investment bank boosted its price target on the cosmetics giant to $101 from $62, citing better-than-expected performance during the recent "6.18 event," a major shopping festival, and improvements in the company's online business. JPMorgan also placed Estée Lauder on its "Positive Catalyst Watch," indicating anticipation for the company's upcoming earnings report. The firm noted it expected the company to deliver results at the upper end of its guidance range, signaling strong confidence in Estée Lauder's near-term performance.
Estée Lauder is up 23.4% since the beginning of the year, but at $91.26 per share, it is still trading 9.4% below its 52-week high of $100.78 from September 2024. Investors who bought $1,000 worth of Estée Lauder’s shares 5 years ago would now be looking at an investment worth $431.51.
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