Estee Lauder has been elevated to a Zacks Rank #1 (Strong Buy) following a 15% upward revision in consensus earnings estimates for fiscal 2026 over the past month. The analyst community now projects adjusted earnings per share of $6.20 for the year ending June 2026, up from $5.40 a year ago, driven by margin expansion initiatives and cost discipline. This upgrade is supported by four consecutive quarters of positive earnings surprises, averaging a beat of 4.5%, and a sustained improvement in operating leverage as the company reduces SG&A expenses as a percentage of sales by 120 basis points year-over-year.

In the fiscal first quarter, Estee Lauder delivered 2% organic sales growth, its first quarterly increase in nine periods, powered primarily by an 8% rise in its fragrance segment. The Launch of the new ‘Pure Radiance’ collection in North America and expanded distribution in China contributed to a 12% lift in fragrance revenues in that region. Skincare and makeup held steady, with each segment up 1% and 0.5% respectively, while travel retail sales climbed 6%, reflecting a gradual recovery in global air passenger traffic.

Gross margin improved by 140 basis points to 75.2% in Q1, driven by a favorable product mix shift toward higher-margin fragrance offerings and efficiencies in the supply chain. The company’s ongoing ‘Project Accelerate’ initiative has already delivered $150 million in cost savings this fiscal year by streamlining production facilities and renegotiating key supplier contracts. Management now targets an additional $200 million in savings through fiscal 2027, which should support operating margin expansion to 23%, up from 20% last year.

Estee Lauder generated $800 million of free cash flow in the first quarter, a 10% increase year-over-year, underpinned by disciplined working capital management and lower capital expenditures. The board approved a 10% hike to the quarterly dividend, bringing it to $0.52 per share, marking the tenth consecutive year of dividend growth. The company also reaffirmed its $1 billion share repurchase authorization, having repurchased $250 million worth of stock in the first three months of the fiscal year.