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Estee Lauder Is Upgraded to Overweight by Analysts at JPMorgan

The Street logo The Street 3/7/2019 Adam Smith
a pencil on a table: Estee Lauder Is Upgraded to Overweight by Analysts at JPMorgan© TheStreet Estee Lauder Is Upgraded to Overweight by Analysts at JPMorgan

Estee Lauder was upgraded to overweight from neutral by JPMorgan on Thursday, and its target price was raised to $175 from $160.

The boost came after the cosmetic company's analyst day event that JPMorgan analysts attended.

"We came out of the presentation and Q&A yesterday more confident that both the FY19 and long-term top-line growth algorithm and EPS goals are not only achievable but actually conservative," wrote the team of JPMorgan analysts, Andrea Teixeira, Christina Brathwaite, and Peter K. Grom.

The group cited Estee Lauder's "continued" strength in China, room to grow in emerging markets and innovation at the company's Clinique brand, as some of the reasons for the upgrade.

"While management maintained its short- and long-term guidance, EL will likely beat what we view as conservative guidance and continue to prove to be a return compounder over the next three years," said the analysts. "Growth has been more resilient than anticipated since our downgrade to Neutral on October last year on concerns about the trade war impact."

In the cosmetics company's 2018 annual report, it boasted sales in China surpassed a $1 billion, with the nation becoming its second largest market. The company also showed strong gains in emerging markets. But in its quarterly report released last month, Estee Lauder warned of possible "future moderation of net sales growth" in China and in its travel retail business, because of the tariff war between Beijing and the U.S. and the ever-slow-moving Brexit deal in the United Kingdom.

"Since then," wrote the JP Morgan Team, "the concerns about the trade war have diminished."

The White House is reportedly close to making a deal that would stave off lifting tariffs on Chinese imports to 25%, and late last month it delayed raising them by March 1 as previously planned.

In its quarterly report, the company said it expects earnings per share of $4.92 to $5 for fiscal 2019, excluding restructuring and other charges and adjustments.

Estee Lauder was trading up by 1.2% on Thursday to $155.74.

This article was originally published by TheStreet.

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