EL – Market expectations are for Uniform ROA expansion, but management may be concerned about growth, China, and travel retail

• The Estée Lauder Companies Inc. (EL:USA) currently trades near historical highs relative to UAFRS-based (Uniform) Earnings, with a 30.6x Uniform P/E, implying bullish expectations for the firm. However, management may be concerned about growth, China, and their travel retail business
• Specifically, management is confident their global travel retail business is flat to declining in the US, and they may lack confidence in their ability to sustain recent growth in their top brands. Furthermore, they may be concerned about the value of their digital spends, and they may lack confidence in their ability to expand digitally in China. In addition, they may be concerned about the impact of the Hong Kong protests on profitability and in their ability to meet their full-year margin guidance. Finally, management may be concerned about further declines in Prestige Beauty in North America.