An iconic beauty stock is getting its shine back. Stephanie Link says it’s still on sale
One of the ways I like to invest is finding best-in-class blue-chip companies with global brands when they’re on sale. Estée Lauder fits the bill. I’ve owned the stock for some time, and after the company’s fiscal fourth-quarter results, I like what I’m seeing even more. Chances are you know at least a few of the Estée Lauder brands. The New York-based company owns some of the biggest names in beauty, including Clinique, Jo Malone, MAC, Bobbi Brown and La Mer. Key points The company owns more than 20 brands, giving investors direct exposure to the higher end of the global beauty market. New CEO Stéphane de La Faverie is overhauling the business through his Beauty Reimagined strategy. The turnaround is starting to show up in sales and margins, but the stock still trades at a steep discount to competitor L’Oréal. Estée Lauder has been a major name in beauty for about 80 years, growing from its namesake line into a global powerhouse that customers are willing to pay up for. But the company lost its way and didn’t change with the times. It became too reliant on luxury spending in China and department stores, missed the shift to online beauty shopping, and was weighed down by an outdated distribution system. The stock is still down roughly 74% from its January 2022 high. EL 5Y mountain Estee Lauder, 5 years But now, with a new CEO and a new game plan, I think Estée Lauder is finally getting back on track. Why I’m investing These are some of the best brands in beauty Estée Lauder is the only major U.S. company focused entirely on the high-end beauty market. Its portfolio spans four major categories: skin care, makeup, fragrance and hair care. And there’s plenty of growth to go after. McKinsey expects the global beauty market to reach $590 billion by 2030 , growing about 5% a year. Estée Lauder already has the brands and scale. What it needed was a better way to capitalize on them. Management is finally changing with the times This is the heart of the turnaround for me. Stéphane de La Faverie took over as CEO in 2025. He knows Estée Lauder well, having joined the company in 2011 and gone on to run its namesake brand and oversee a broader portfolio that included The Ordinary and Le Labo. His strategy, called “Beauty Reimagined,” is to make Estée Lauder faster and more in tune with where consumers are shopping and what they want. The company is speeding up innovation, expanding into newer channels like Amazon, TikTok Shop and Sephora, putting more money behind its brands and cutting costs. Its restructuring plan is now expected to generate about $1.2 billion in annual gross benefits, helping Estée Lauder rebuild margins while freeing up money to invest back into growth. The comeback is taking shape In its latest quarter, Estée Lauder beat expectations and raised its outlook, while sales increased for a fourth straight quarter. There were signs of improvement across the business. Travel retail got better, online sales grew at a double-digit rate, and both gross and operating margins improved. There’s still room for profitability to improve, which gives Estée Lauder another way to win: If sales continue to recover while management rebuilds margins, I think earnings estimates can move higher over time … and the stock can follow. Why now? The turnaround is gaining traction, but I don’t think the stock fully reflects it yet. Estée Lauder shares are still down this year, even as organic sales growth improves and gross and operating margins recover. That combination can push earnings estimates higher over time, and ultimately the stock along with them. Yet Estée Lauder still trades discount to L’Oréal, its largest global peer, on a price-sales basis. To me, that’s a buying opportunity in a company whose new management team has finally found its way. Bottom line Beauty Reimagined is starting to work. Sales are growing again and there’s still plenty of room for margins to recover. With the stock trading at a steep discount, there’s a lot to like at today’s price. And yes, I put my money where my mouth is (almost literally). I use MAC lip gloss religiously on TV, and I have CNBC’s makeup team to thank for that. Disclosures: Link owns in Hightower Advisors. All opinions expressed by the [CNBC Pro contributors] are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. This content is provided as part of our editorial output for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to buy any security or other financial asset. The content is general in nature and does not reflect any individual’s unique personal circumstances. 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