Estée Lauder
stock was rising on Monday after a report that billionaire Nelson Peltz was considering mounting a shareholder campaign against the cosmetics giant.
Peltz, the founder of investment management firm Trian Fund Management, may be gearing up to launch an activist campaign that seeks to oust
Estée Lauder
(ticker: EL) CEO Fabrizio Freda and push for a potential turnaround and sale of the company, The New York Post reported on Sunday, citing sources close to the situation. It was unclear whether Peltz had acquired shares in Estée Lauder, the Post reported.
A Trian spokeswoman didn’t immediately respond to Barron’s request to verify the report. Estée Lauder didn’t immediately respond to a request for comment.
Still, Wall Street rallied behind the potential of an activist campaign. Shares of Estée Lauder were up1.8% to $207.10 in early morning trading, while the S&P 500 was unchanged. The stock has shed 17% this year.
Estée Lauder was a 2022 Barron’s stock pick.
“We also think Peltz’s potential involvement creates a win-win for EL shareholders,” wrote Stifel analyst Mark Astrachan in a note to clients. “Should he become involved and advocate for a sale or management change, and [this] is coupled with productivity and operational improvement, EL shares are likely to outperform.”
Astrachan has a Buy rating on the stock and a $265 price target.
Estée Lauder’s sales growth has “modestly underperformed” that of its prestige beauty peers since 2018, Astrachan noted—especially since early 2022 as the company navigates a challenging operational environment in China, one of its largest markets.
The shares nosedived following Estée Lauder’s most recent earnings report, in which the company cut guidance—citing an uncertain postpandemic recovery in Asia.
Earlier this year, Peltz had
Walt Disney
in his line of fire. Within roughly a month of Peltz’s campaign becoming public, Disney announced $5.5 billion in cost reductions and plans to reinstate its dividend—a resounding victory for the activist investor.
Estée Lauder might be a tougher nut to crack, because the Lauder family controls 84% of the voting power and four out of the 17 board sets.
“It’s pretty simple: without the Lauders, nothing substantive (like a sale) is possible,” wrote Wells Fargo analyst Christ Carey in a research note. Carey has an Overweight rating and $225 price target.
Write to Sabrina Escobar at [email protected]
Read the full article here
