UPDATE 2-Estee Lauder sees higher-than-expected profit

Fri Oct 16, 2009 9:25am EDT

* Q1 profit to "significantly" exceed company's prior view

* Cites growth in Asia, early holiday shipments

* Says to raise FY profit view later this month

* Shares jump 5.5 percent (Adds company's August forecast, analysts' comments, byline; updates stock activity)

By Jessica Wohl

CHICAGO, Oct 16 (Reuters) - Cosmetics maker Estee Lauder Cos Inc (EL.N) expects to post a much higher-than-expected quarterly profit and raise its fiscal-year forecast later this month, after sales topped expectations, sending its shares up more than 5 percent.

The company, best known for its eponymous line and brands such as Clinique, said it still had a cautious view on consumer spending.

Estee Lauder derives much of its sales from department store makeup counters, which have been pressured by a drop in spending as consumers cut back on nonessential purchases.

In August, the company forecast a weaker-than-expected 2010 profit as it dealt with slack demand for makeup, perfume and skincare items during the lengthy recession. [ID:nN13265204]

Estee Lauder cited tight cost controls, new products, growth in Asia, increased traffic in its travel retail business and improved currency translation for its upbeat forecast on Friday. It said sales in the first quarter, which ended on Sept. 30, also got a boost from from earlier holiday shipments, which it had expected to land in the second quarter.

The company said first-quarter earnings before restructuring charges should be "significantly higher than previous guidance."

In August, Estee Lauder forecast first-quarter earnings of 23 cents to 30 cents per share. Analysts on average expect a profit of 25 cents, according to Thomson Reuters I/B/E/S.

2010 FORECAST TO BE RAISED

While Estee Lauder said it remained cautious about the economy and consumer spending throughout the year, it plans to increase its fiscal-year profit forecast when it reports first-quarter results on Oct. 30.

In August, the company forecast fiscal-year earnings of $1.55 to $1.70 per share. Analysts are calling for a profit of $1.69.

Sanford Bernstein analyst Ali Dibadj said he expected the 2010 forecast to be raised "materially," perhaps closer to $1.70 to $1.85 per share.

The increase in the fiscal 2010 outlook may only stem from the first-quarter upside, BMO Capital Markets analyst Connie Maneaty said in a note to clients.

Estee Lauder said it spent less than planned in the first quarter due to the global economic downturn and the potential impact of the H1N1 flu. It expects to speed up investment spending above first-quarter levels during the remainder of fiscal 2010.

"Investment spending may limit the potential earnings" in the rest of the year, said Maneaty, who has a "market perform" rating on Estee Lauder.

"We like the change underway at Estee Lauder," she wrote, "but we believe it is fully reflected in the stock price and valuation.

Shares of Estee Lauder rose 5.5 percent to $41.26 in premarket trading. (Reporting by Jessica Wohl; Editing by Lisa Von Ahn)

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