Raymond James upgraded Estée Lauder (NYSE:EL) to Strong Buy from Market Perform, saying the beauty group’s turnaround is shifting “from story to execution” as operating momentum improves and earnings visibility strengthens.
Shares of the cosmetics company rose about 4% in U.S. premarket trading following the call.
Analyst Olivia Tong added the stock to Raymond James’ Analyst Current Favorite list and set a $130 price target, arguing that fiscal 2025 likely represented the low point for earnings.
Tong pointed to improving market share trends in the United States and a recovery in category growth in China as key drivers supporting more stable sales and profit performance.
She also noted that Travel Retail, which has weighed on results in recent years, “should be less of a headwind from here.” In addition, a greater mix toward faster-growing retail channels, margin rebuilding initiatives and continued savings from the Profit Recovery & Growth Plan (PRGP) are expected to free up resources for long-term growth investment.
In her note, Tong highlighted better execution in Estée Lauder’s two largest markets. In the U.S., gains are being driven by increased product innovation, changes in brand mix and more effective marketing. In China, retail market share is rising again, supported by double-digit retail sales growth in the first quarter of fiscal 2026 that outpaced the broader category, along with stronger performance during key shopping events.
During the 11.11 festival, the Estée Lauder brand moved up to second place on Tmall from fourth a year earlier, while also reducing promotional intensity.
Tong also pointed to progress under the Beauty Reimagined strategy, which is accelerating speed to market and modernizing marketing execution. The company is targeting more than 25% of fiscal 2026 sales from new products and plans to triple the share of launches developed in under 12 months.
Cost savings from the PRGP are increasingly being reinvested into brand building, including more contemporary celebrity partnerships aimed at attracting younger consumers.
“The combination of faster innovation and more relevant marketing is also consistent with EL’s sharper pricing/promo, driving sales and margins,” Tong wrote.
She expects fiscal 2026 to mark the beginning of a multi-year earnings recovery, forecasting a 35%–36% compound annual growth rate in earnings from fiscal 2025 through 2028, well ahead of sector peers.
“The PRGP currently targets $1.1-1.4B in gross savings, inclusive of a 5,800-7,000 headcount cut, and we see upside to current targets as outsourcing and centralized procurement ramps while simplification drives additional savings,” she added.
Based on her estimates, every $100 million in net savings would lift operating margin by roughly 70 basis points. Tong forecasts operating margin of about 12.0% in fiscal 2026, with an upside scenario pointing to a return to mid-teens margins by fiscal 2028 as savings increasingly flow through to profitability.