Activist investor Nelson Peltz has no intention of pursuing a shakeup at Club holding Estee Lauder (EL), in part because the prestige beauty firm’s dual-class share structure gives the Lauder family outsized control over the direction of the company, Jim Cramer said Monday . Jim’s comments came in response to a New York Post story Sunday that claimed Peltz was exploring an activist campaign targeting Estee Lauder, while seeking the ouster of longtime CEO Fabrizio Freda. The Post report came on the heels of Estee Lauder last week reporting mixed quarterly results and issuing disappointing guidance that sent the stock tumbling by around 17%. Jim said he called Peltz, founding partner of hedge fund Trian Fund Management, who denied having any interest in Estee Lauder. “Nelson immediately told me this is a two-class situation . That’s the Lauder family and the common shareholder. And so forget about it,” Jim said. The founding Lauder family owns roughly 38% of Estee Lauder common stock and dominates 86% of the voting power . Moreover, we see no need for activism at Estee Lauder. The Asia travel retail headwind that impacted the prior quarter and poses a headwind to business in the near term is temporary. The stock should be bought with an eye to the eventual rebound, once travel comes back online more fully in Asia. Freda undoubtedly misjudged the pace of the travel retail recovery amid China’s gradual economic reopening this year. But, given his longer-term track record, investors should grant him the benefit of the doubt, at least until the company’s next quarterly report. Indeed, last week we reviewed every quarter under Freda and found only two times he’s missed on Wall Street’s earnings expectations – the Covid-challenged June 2020 quarter and this past one. Nonetheless, on Sunday we lowered our price target on Estee Lauder to $260 per share, from $300, while reiterating a 1 rating on the stock. That means we continue to see EL as a buy at these levels on the back of the company’s solid business fundamentals, as well on our assessment that the travel retail overhang will recede as Chinese consumers continue to travel more frequently. (Jim Cramer’s Charitable Trust is long EL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
An Estee Lauder pop-up store is seen inside daimaru Department Store on Nanjing Road Pedestrian street in Shanghai, China, August 6, 2021.
Costfoto | Future Publishing | Getty Images
Activist investor Nelson Peltz has no intention of pursuing a shakeup at Club holding Estee Lauder (EL), in part because the prestige beauty firm’s dual-class share structure gives the Lauder family outsized control over the direction of the company, Jim Cramer said Monday.
