4 cosmetics stocks worth watching for strong industry trends

statesbulletin April 3, 2023

0 5 minutes read

Zacks Several companies in the cosmetics industry benefit from strong online businesses. Companies in this space are expanding their omnichannel capabilities to provide consumers with flexible and convenient shopping options.

Cosmetics companies are witnessing a surge in demand for skin and personal care products as consumer trends toward self-care increase. And a focus on discreet product launches works for companies that: The Estée Lauder Companies Inc. El, Coty Co., Ltd. Coty, Interparfums Co., Ltd. IPAR and Helen of Troy Exclusive Helle.

That said, players in this space face high inflationary pressures and supply chain disruptions. Inflationary risk to consumer spending behavior is affecting demand for some companies’ products.

About the industry

The Zacks cosmetics industry includes companies that provide beauty and personal care products. Industry players manufacture, distribute, market and market skin care, fragrance, makeup and hair care products. Many companies in the space market sell through sales representatives, but some sell their products through retailers, independent and chain drug stores and pharmacies, luxury perfume stores, department stores, and beauty salons. . We also operate through retailer websites, third party distributors, onboard and duty free shops. Products offered by industry participants include moisturizers, serums, toners and cleansers for skin care. Perfume spray, candles and soap scents. Lipstick, mascara, powder, eyeshadow, foundation, and nail polish. Shampoo, conditioner and hair color products for hair care.

Trends Shaping the Future of the Cosmetics Industry

Strong demand for skincare and makeup: Soaring demand for skincare and other personal care products is good news for some cosmetics companies. Growing consumer interest in self-care and maintaining a healthy skin care routine lends itself well to this category. The strength of the make-up category, where beauty demand is rising as socialization progresses, has driven the growth of cosmetics players. Players in this space are also strong in the fragrance and hair care categories, with product novelty being a solid driver. Such a rise could continue to support the top-line performance of cosmetics companies.

Innovation and digitization – the main drivers: When it comes to beauty and skin care, consumers continue to expect unique product offerings that incorporate the latest technology and expert scientific formulations. With a focus on resonating with the evolving tastes of consumers, cosmetic manufacturers are busy with innovation and product launches. Growing consumer awareness is also stimulating demand for organic skincare and “clean beauty” products. Additionally, the cosmetics manufacturer’s top priority was to enhance its e-commerce capabilities to expand its market reach. Companies in this space are making great strides, evidenced by tools such as virtual trials, new digital payment solutions, and digital marketing efforts. Other than this, players have strengthened their brand portfolios through discreet acquisitions and strategic alliances.

headwind of inflation: Companies in the cosmetics industry face inflationary pressure on operating costs such as labor, consumables and travel expenses. Some players are battling supply chain disruptions caused by prolonged COVID-related factors, port congestion, and reduced air freight capacity, resulting in rising freight costs. The impact of lower demand and lower discretionary spending due to inflationary pressures is also a major concern for payers.

Sachs industry ranks show bright outlook

Zacks Cosmetics Industry belongs to the broader Zacks Consumer Staples division. The industry currently holds a Zacks Industry Rank of #89, placing him in the top 36% of his Zacks industry of over 250.

The Group’s Zacks Industry Rank, which is essentially the average of the Zacks Ranks of all member stocks, shows a solid near-term outlook. Our research shows that the top 50% of industries ranked by Zacks are more than twice as good as the bottom 50%.

Before we dive into some of the stocks you might want to consider in your portfolio, let’s take a look at the industry’s recent stock market performance and valuations.

industry vs.wider market

The Zacks Cosmetics industry underperformed the Zacks S&P 500 Composite and the broader Zacks Consumer Staples sector over the past year.

The industry fell 17.5% over the period, compared to an 11.3% decline for the S&P 500. The broader sector fell 2.6% over the above timeframe.

1 year price performance

Industry Current Rating

Based on the 12-month futures price/earnings ratio (P/E) commonly used to value consumer goods stocks, the industry is currently trading at 33.9x compared to 18.47x for the S&P 500 and 18.7x for the sector. are traded.

As the chart below shows, over the past five years the industry has traded at a high of 45.92x, a low of 19.64x and a median of 29.07x.

Price/earnings ratio (last 5 years)

4 Cosmetic Stocks to Watch

interparfum: A Zacks Rank 1 (Strong Buy) company manufactures, distributes and markets a wide range of fragrances and related products. Inter Parfums benefits from growth across its European and US operations thanks to impressive brand performance. IPAR’s focus on innovation and product launches is a key driver. Management plans to expand the business through new licenses and acquisitions. you can see See the full list of today’s Zacks #1 ranked stocks here.

The Zacks Consensus estimate for IPAR’s 2023 earnings per share (EPS) rose 4.2% to $4.00 per share over the past 30 days. Inter Parfums stock has increased 81.7% over the past six months. IPAR’s expected EPS growth is 15% over three to five years.

Price and Consensus: IPAR

Coty: The manufacturer, marketer and distributor of this beauty product currently has a Zacks Rank 2 (Buy). Coty benefits from his focus on six strategic pillars aimed at sustainable growth. This includes stabilizing his consumer beauty brand, strengthening e-commerce, and establishing a robust skin care portfolio. COTY has entered into several strategic partnerships to strengthen his portfolio of brands. Focusing on cost structure optimization is a good sign.

The Zacks Consensus estimate for Coty’s fiscal 2023 EPS has remained unchanged at 37 cents for the past 30 days. COTY’s stock price is up 72.6% over the past six months. COTY’s expected EPS growth is 14.7% over three to five years.

Price and Consensus: COTY

The Estée Lauder Companies: This New York-based company manufactures and sells skin care, makeup, fragrance, and hair care products. A Zacks Rank 3 (Hold) company benefits from a strong online business. In this regard, The Estée Lauder Companies has implemented new technologies and digital experiences such as online booking per store appointment, omnichannel loyalty programs and high-touch mobile services. EL has a strong presence in emerging markets and is insulated from macroeconomic headwinds in mature markets.

The Zachs consensus estimate for the company’s 2023 EPS has risen a penny over the past 30 days to $4.97. EL stock is up 8.5% over the past six months. The Estée Lauder Companies expects EPS growth of 9.2% over three to five years.

Price and Consensus: EL

Helen of Troy: This provider of consumer goods across beauty, household, health & home segments focuses on solid investments in leadership brands. Helen of Troy is making significant investments in key areas for continued growth. To this end, the company invests in consumer-centric innovation, digital marketing and media, new packaging, enhanced production and distribution capabilities, and direct-to-consumer channels. The Zacks Rank 3 company’s focus on developing Project Pegasus, a global restructuring plan, looks promising.

The Zachs consensus estimate for Helen of Troy’s fiscal 2023 EPS has remained unchanged for the past 30 days at $9.32. The company’s stock has fallen 7.2% over the past six months. HELE’s expected EPS growth is 8% over three to five years.