JP Morgan Cuts Estee Lauder Rating

Analyst John Faucher is skeptical that the company's earnings expectations are realistic

JP Morgan cut its investment recommendation on Estee Lauder (EL ) to neutral from overweight.

Analyst John Faucher said Estee Lauder lowered its first half guidance while reiterating $1.95 to $2.00 fiscal year 2007 (ending June) earnings per share guidance range. He pointed out that the company's first half guidance implies second half earnings per share of $1.08, which would represent 27% growth vs. last year, and more than 30% earnings per share growth from the first half. The analyst says that despite a number of "product launches, programs" set for the back half of the year, he's skeptical that this level of growth is realistic. He cut his $1.98 fiscal year 2007 (ending June) earnings per share estimate to $1.89. The analyst views the valuation as appropriate given the company's long-term potential, but he also thinks the upside is limited given the challenging environment in both the US and Europe.

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