Estée Lauder Cos. Inc. (NYSE:EL)

Goodwill

The goodwill value experienced a decline from 1926 million USD in 2018 to 1401 million USD in 2020. However, it sharply increased to 2616 million USD in 2021, followed by a slight decrease to 2486 million USD by 2023. This indicates an initial reduction potentially due to asset impairment or divestitures, with a substantial recovery or acquisition phase afterward.

Customer lists, license agreements and other amortizable intangible assets

These assets have shown a significant increase from 740 million USD in 2018 to a peak of 2316 million USD in 2021, before declining to 2030 million USD in 2023. This trend suggests considerable acquisition or recognition of intangible assets up to 2021, followed by amortization or asset sales.

Accumulated amortization

The accumulated amortization has increased steadily from -375 million USD in 2018 to -766 million USD in 2023. This consistent rise reflects ongoing systematic expense recognition for amortizable intangible assets over the period.

Amortizable intangible assets, net book value

The net book value of amortizable intangible assets grew significantly from 365 million USD in 2018 to a high of 1729 million USD in 2021, then declined to 1264 million USD in 2023. This pattern aligns with increased acquisitions followed by amortization and/or disposals impacting the net asset value.

Trademarks (Non-amortizable intangible assets)

Trademarks showed moderate fluctuations from 911 million USD in 2018 to 1223 million USD in 2020, then doubled sharply to 2366 million USD in 2021, dipped to 1992 million USD in 2022, and surged dramatically to 4338 million USD in 2023. This suggests extensive brand-related acquisitions or revaluations particularly in recent years, emphasizing the growing importance or valuation of brand equity.

Total Intangible assets

Intangible assets increased steadily from 1276 million USD in 2018 to 4095 million USD in 2021, then decreased to 3428 million USD in 2022 before surging to 5602 million USD in 2023. This overall upward trend indicates substantial investment in intangible assets, with temporary adjustments likely due to amortization or impairments, followed by renewed growth.

Goodwill and other intangible assets combined

The aggregate value of goodwill and other intangible assets rose impressively from 3202 million USD in 2018 to 6711 million USD in 2021, dipped to 5949 million USD in 2022, and increased further to 8088 million USD in 2023. This reflects a strong accumulation of intangible asset value primarily driven by acquisitions or revaluations, despite minor declines potentially attributable to amortization or impairments in intermediate years.

Over the observed periods, total assets, both reported and adjusted for goodwill, show an overall upward trend with some fluctuations. Reported total assets increased significantly from 12,567 million USD in mid-2018 to 23,415 million USD in mid-2023, nearly doubling over five years. Adjusted total assets follow a similar trajectory, rising from 10,641 million USD to 20,929 million USD in the same period, indicating that goodwill adjustments account for a substantial portion of the company’s asset base.

Stockholders’ equity, reported and adjusted, presents a more variable pattern. Reported equity decreased from 4,688 million USD in 2018 to a low of 3,935 million USD in 2020, then recovered strongly to peak at 6,057 million USD in 2021 before slightly declining again to around 5,585 million USD by 2023. In contrast, adjusted equity, which excludes goodwill, consistently remains lower than reported equity and shows a mild downward trend from 2,762 million USD to approximately 3,099 million USD over the five years. This discrepancy highlights the impact of intangible assets on the equity structure.

Net earnings attributable to the company display notable variability. Reported net earnings rose sharply from 1,108 million USD in 2018 to a peak of 2,870 million USD in 2021, followed by a marked decline to 1,006 million USD in 2023. The adjusted net earnings, accounting for goodwill adjustments, follow a comparable pattern but show less volatility, particularly evident in the 2019-2020 period where adjusted earnings remain substantially higher than reported earnings (1,496 million USD vs 684 million USD in 2020). This suggests that certain adjustments improve the representation of underlying profitability in more challenging years.

Overall, the data reflects growth in asset base and variations in equity and profitability over the period. The distinctions between reported and adjusted figures emphasize the influence of goodwill and intangible assets on the company’s financial position and earnings, suggesting that analysis excluding these elements might provide a different perspective on operational performance and financial stability.

The financial data over the six-year period reveals notable fluctuations in profitability, asset efficiency, leverage, and returns.

Net Profit Margin

The reported net profit margin experienced significant volatility, starting at 8.1% in mid-2018, peaking at 17.7% in 2021, and then decreasing to 6.32% by mid-2023. The adjusted net profit margin, which accounts for goodwill adjustments, generally shows higher values than the reported figures, especially during 2020 and 2021, indicating that non-operational charges or impairments affected the reported results in these years.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios declined notably from 2018 to 2023. Initially, the adjusted turnover was higher than reported (1.29 vs 1.09 in 2018), suggesting asset adjustments impact efficiency calculations. The downward trend reflects decreasing effectiveness in generating revenue from assets, with the lowest ratios observed in 2023 (0.68 reported, 0.76 adjusted), signaling potential challenges in asset utilization.

Financial Leverage

Financial leverage increased consistently over the period, with the adjusted leverage ratio rising from 3.85 in 2018 to 6.75 in 2023, surpassing the reported metrics which also showed an increase from 2.68 to 4.19. This indicates growing reliance on debt or liabilities to finance assets, with adjustments for goodwill intensifying this trend. Such leverage growth may elevate financial risk.

Return on Equity (ROE)

ROE showed considerable variability, with reported figures peaking at 47.38% in 2021 before declining sharply to 18.01% in 2023. Adjusted ROE values are substantially higher than reported ones across all years, reaching an impressive 85.47% in 2021. Both reported and adjusted ROEs decreased notably in the last year, reflecting diminished profitability or increased equity base impacts. The divergence between reported and adjusted ROEs suggests goodwill adjustments have a strong influence on equity returns.

Return on Assets (ROA)

Reported ROA mirrors the trends in profitability and asset turnover, peaking in 2019 and 2021, then falling to 4.3% in 2023. Adjusted ROA remains consistently higher, indicating improved asset profitability when goodwill is accounted for, but also declines significantly from 2021 onwards. The pattern highlights challenges in generating returns from assets in recent years.

Overall, the adjustments for goodwill have a material impact on profitability and efficiency metrics, typically elevating performance indicators. Despite these adjustments, the recent decline in margins, asset turnover, and returns suggests operational or market pressures. The rising leverage ratios further imply increased financial risk, which, combined with falling returns, warrants attention to balance sheet management and operational efficiency going forward.

The financial data reveals notable fluctuations in net earnings and profit margins over the six-year period. The reported net earnings attributable to the company increased significantly from 2018 to 2019, rising from 1,108 million US dollars to 1,785 million US dollars. However, in 2020, there was a sharp decline to 684 million US dollars, followed by a strong recovery in 2021, peaking at 2,870 million US dollars. This was succeeded by a decrease in 2022 to 2,390 million US dollars and a further drop in 2023 to 1,006 million US dollars.

Adjusted net earnings show a similar overall trend but with less volatility. Adjusted earnings rose steadily from 1,108 million US dollars in 2018 to 1,853 million US dollars in 2019, then experienced a less severe decline to 1,496 million US dollars in 2020. After reaching a peak of 2,941 million US dollars in 2021, adjusted earnings decreased to 2,390 million US dollars in 2022 and then dropped further to 1,006 million US dollars in 2023. The adjustment measures appear to smooth out some of the reported earnings volatility, particularly the sharp dip in 2020.

Regarding profitability, the reported net profit margin mirrored earnings trends, improving from 8.1% in 2018 to 12.01% in 2019 before dropping sharply to 4.79% in 2020. The margin then rebounded robustly to 17.7% in 2021, followed by a decline to 13.47% in 2022 and a further decrease to 6.32% in 2023.

Adjusted net profit margin data aligns with the adjusted earnings and indicates a generally higher profitability level compared to reported metrics, reflecting the impact of goodwill adjustments and other corrections. Adjusted margin increased from 8.1% in 2018 to 12.47% in 2019, declined more moderately to 10.47% in 2020, then peaked at 18.14% in 2021. Subsequently, it decreased to 13.47% in 2022 and 6.32% in 2023, mirroring the trend in reported margins in the last two years.

Overall, the data highlights a period of earnings volatility with marked impacts likely due to external economic factors, notably in 2020, followed by recovery phases. The profitability trends indicate that while adjusted measures smooth some fluctuations, the company’s net profit margins remain sensitive to market and operational conditions, particularly evident in the significant margin contractions observed in the most recent fiscal year.

The financial data reveals several notable trends over the six-year period. Both reported and adjusted total assets have demonstrated a general upward trajectory, indicating an overall growth in the asset base. Reported total assets increased from 12,567 million US dollars in 2018 to 23,415 million US dollars in 2023, while adjusted total assets, which exclude goodwill, similarly rose from 10,641 million US dollars to 20,929 million US dollars during the same timeframe.

In contrast, total asset turnover ratios have exhibited a declining trend. The reported total asset turnover decreased from 1.09 in 2018 to 0.68 in 2023, and adjusted total asset turnover fell from 1.29 to 0.76 over the same period. This pattern indicates that, despite an increasing asset base, the company’s efficiency in generating sales per unit of assets has diminished. Notably, adjusted total asset turnover ratios consistently remain higher than the reported ones, reflecting the positive impact of excluding goodwill on turnover measurements.

Asset Growth

Both reported and adjusted total assets nearly doubled over six years, reflecting sustained investment or asset accumulation.

Asset Turnover Decline

The total asset turnover ratios suggest decreasing operational efficiency in utilizing assets to generate revenue, with the reported ratio dropping more sharply.

Goodwill Impact

Consistently higher adjusted turnover ratios indicate the exclusion of goodwill provides a more favorable view of asset utilization rates.

Overall, the data implies that while asset expansion has been considerable, the company faces challenges in maintaining or improving asset utilization efficiency. Strategic focus on optimizing asset use could be warranted to enhance financial performance.

Total Assets

Both reported and adjusted total assets have shown a general increasing trend from 2018 to 2023. Reported total assets increased from 12,567 million USD in 2018 to 23,415 million USD in 2023, with a notable jump between 2019 and 2021. Adjusted total assets similarly increased from 10,641 million USD in 2018 to 20,929 million USD in 2023, mirroring the overall upward trajectory, though consistently lower than reported figures due to goodwill adjustments.

Stockholders’ Equity

Reported stockholders’ equity exhibited fluctuations over the period, starting at 4,688 million USD in 2018, declining to 3,935 million USD in 2020, followed by a significant recovery to 6,057 million USD in 2021, and then a slight decrease through 2023 to 5,585 million USD. Adjusted stockholders’ equity remained consistently lower than reported equity, beginning at 2,762 million USD in 2018 and ending at 3,099 million USD in 2023. It experienced a minor decline until 2019, a slight recovery in 2020 and 2021, followed by a gradual decrease thereafter.

Financial Leverage

Reported financial leverage showed variability, increasing from 2.68 in 2018 to 4.52 in 2020, then decreasing to 3.63 in 2021 before rising again to 4.19 in 2023. The adjusted financial leverage displayed higher values than reported leverage throughout the period, starting at 3.85 in 2018 and steadily increasing to 6.75 in 2023. This indicates a consistent trend toward higher leverage when accounting for goodwill, reflecting increased reliance on debt relative to adjusted equity.

Overall Trends and Insights

The data indicates an expansion in the company's asset base over the six-year span, with total assets nearly doubling on a reported basis. Despite some fluctuations, stockholders’ equity has generally been stable or slightly increasing on a reported basis, while adjusted equity remains lower and relatively more conservative. The disparity between reported and adjusted figures underlines the impact of goodwill on the balance sheet.

The rising adjusted financial leverage ratio suggests the company is increasingly utilizing debt financing relative to adjusted equity, which could imply greater financial risk when goodwill is excluded. The fluctuations in reported leverage, on the other hand, appear less pronounced but still show an overall upward trend in leverage from 2018 to 2023.

The financial data demonstrates notable fluctuations in net earnings, stockholders' equity, and return on equity over the six-year period ending June 30, 2023.

Net Earnings

Reported net earnings exhibit a volatile pattern, with a peak in 2021 at USD 2,870 million, followed by a decline to USD 1,006 million in 2023. The adjusted net earnings, which likely exclude non-recurring items, show a similar trend but with less variability, highlighting a recovery in 2020 with USD 1,496 million after a drop in reported figures, peaking in 2021, and then decreasing to 1,006 million by 2023.

Stockholders’ Equity

Reported stockholders’ equity decreases from USD 4,688 million in 2018 to USD 3,935 million in 2020 but rebounds significantly to reach USD 6,057 million in 2021 before slightly decreasing to approximately USD 5,585 million in 2023. Adjusted stockholders’ equity follows a comparable downward trend initially—from USD 2,762 million in 2018 to USD 2,534 million in 2020—but then rises to USD 3,441 million in 2021, with a modest decrease to USD 3,099 million in 2023. The adjusted figures are consistently lower than the reported ones, reflecting the exclusion of goodwill or other intangible assets.

Return on Equity (ROE)

Reported ROE shows significant fluctuation, reaching a high of 47.38% in 2021 after dropping to 17.38% in 2020, then declining to 18.01% in 2023. Adjusted ROE, which likely accounts for equity excluding goodwill, demonstrates enhanced profitability metrics, with values substantially higher than reported ROE across all periods. Adjusted ROE peaks at 85.47% in 2021, then falls sharply to 32.46% in 2023. The disparity between reported and adjusted ROE suggests that goodwill and intangible assets significantly affect equity calculations, impacting the profitability ratios.

Overall, the period shows considerable operational and financial performance fluctuations, with 2021 marking the strongest year in terms of earnings and returns. The adjusted metrics provide a more favorable view of return on equity, indicating underlying business profitability beyond accounting adjustments. The declines in 2022 and 2023 point to a challenging environment impacting earnings and equity value, necessitating close monitoring of subsequent periods for signs of recovery or continued pressure.

Net Earnings

The reported net earnings attributable to the company display notable volatility over the examined period. After an initial increase from 1108 million USD in 2018 to 1785 million USD in 2019, there is a sharp decline in 2020 to 684 million USD. This is followed by a strong recovery peaking at 2870 million USD in 2021 before falling again to 2390 million USD in 2022 and then further to 1006 million USD in 2023. The adjusted net earnings show a similar pattern but with less extreme fluctuation; the adjusted figures are higher than reported earnings in most years except 2018 and 2022-2023, indicating that adjustments had a significant positive effect particularly in 2019 and 2020.

Total Assets

Reported total assets show a consistent upward trend from 12567 million USD in 2018 to 23415 million USD in 2023, with a slight dip between 2021 and 2022. Adjusted total assets follow a similar trajectory, increasing steadily from 10641 million USD in 2018 to 20929 million USD in 2023. The gap between reported and adjusted total assets suggests that goodwill and other adjustments materially reduce the asset base but this difference remains relatively stable over time.

Return on Assets (ROA)

The reported ROA mirrors the swings seen in net earnings, increasing from 8.82% in 2018 to a peak of 13.57% in 2019, plummeting to 3.85% in 2020, rising again to 13.06% in 2021, and then decreasing gradually to 4.3% in 2023. The adjusted ROA similarly features volatility but generally remains higher than the reported ROA for each year, suggesting that excluding goodwill and other adjustments provides a more favorable view of asset profitability. Both measures show a marked decline in 2023 compared to previous years.

Overall Insights

The data reveal a business experiencing significant fluctuations in profitability and returns, with peaks in 2019 and 2021 and troughs in 2020 and 2023. Adjustments for goodwill and similar items consistently improve the appearance of net earnings and ROA, underscoring the impact of intangible assets on financial performance assessment. The steady growth in total assets across the period suggests ongoing investment or asset acquisition activities despite the volatility in profitability. The decline in profitability metrics in the most recent year may warrant further examination into operational or market challenges.