According to a forecast report on Estée Lauder’s fourth quarter by global banking investment firm, Jefferies, the firm maintains a constructive view on Lauder’s growth prospects with a broadening set of brand drivers, improvement in global travel retail (10% to 12% of sales) and better alignment with distribution shifts toward specialty retail in mature markets. Here, highlights from the Jefferies forecast.

Travel Retail Channel Improvement Is Nice Tailwind: Estée Lauder has been fighting a growth headwind within travel retail over the last few years, with channel growth below the company’s organic growth targets. Recent data triangulating passenger traffic with improved merchandising and beauty category strengthening bodes well for its global travel retail business, which we estimate accounts for 10% to 12% of total revenues. The acceleration in travel retail could easily contribute 50bps to annual growth targets.

Better Alignment with Consumer Shift to Specialty Multi-Brand Stores:
The company is playing a bit of catch up within specialty multi-brand environments, having focused on department stores and vertical retail previously. We are encouraged by early signs of takeaway within domains such as Ulta Beauty and Blue Mercury and rationalization within Sephora to focus on core (vs. derivative) brands. We estimate specialty is gaining at least 1-2ppts of sales share a year from department stores; closing the gap for Lauder is an important sales driver.

Acquisitions from Dilution to Accretion:
We are expecting Lauder’s 2017 acquisitions of Too Faced and Becca to be accretive in FY18+FY19, after being an est. $0.08 drag in FY17. We see FY18 core EPS at 10% growth, adjusting for this factor.