Research from Water Tower Research, Water Tower Research

Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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Equity Bottom-Up

Estee Lauder Companies Cl A / Equity Bottom-Up

<ul><li>EL reported a 4QFY26 upside surprise and the stock traded up more than 15%. </li><li>Sales were +6.8% to $3,640M, with organic sales +5.3%; FactSet consensus was $3,545M.</li><li>This was the fourth consecutive quarter of positive organic sales growth; sales growth was helped by the placement of Amazon’s (AMZN) Prime Day in June this year versus July last year. </li></ul>

EL reported a 4QFY26 upside surprise and the stock traded up more than 15%. Sales were +6.8% to $3,640M, with organic sales +5.3%; FactSet consensus was $3,545M.This was the fourth consecutive quarter of positive organic sales growth; sales growth was helped by the placement of Amazon’s (AMZN) Prime Day in June this year versus July last year. 

EL: Turnaround Progressing; Raising Our Annual EPS Estimates

Equity Research Focusing on the Consumer Sector, Small Cap Consumer Research

Small Cap Consumer Research

Equity Research Focusing on the Consumer Sector

Small Cap Consumer Research, LLC is a leading company-sponsored equity research provider focusing on the consumer sector (apparel, brand licensing and specialty retailing segments).

<ul><li>We are reiterating our Buy rating and $0.25 price target, but reducing our projections after Starco Brands posted a lower than expected 2Q24 and did not provide 2024 guidance, as management continues to pivot to multiple new and expanded retailer relationships for virtually all their brands, including the addition of Costco as a key new partner.</li><li>We believe, beginning in 3Q24, Starco will take their stable of brands to a new level in terms of door penetration which, when combined with an aggressive focus on adding new categories, will position the company for strong top line and Adjusted EBITDA expansion for 2025 and beyond.</li><li>As such, we continue to view the future of Starco as strong, and we reiterate our Buy rating and $0.25 price target for STCB.</li></ul>

We are reiterating our Buy rating and $0.25 price target, but reducing our projections after Starco Brands posted a lower than expected 2Q24 and did not provide 2024 guidance, as management continues to pivot to multiple new and expanded retailer relationships for virtually all their brands, including the addition of Costco as a key new partner.We believe, beginning in 3Q24, Starco will take their stable of brands to a new level in terms of door penetration which, when combined with an aggressive focus on adding new categories, will position the company for strong top line and Adjusted EBITDA expansion for 2025 and beyond.As such, we continue to view the future of Starco as strong, and we reiterate our Buy rating and $0.25 price target for STCB.

elf Beauty Inc - STCB: 2Q Review: Adding Costco, Planning for the Future, Reiterate Buy

<ul><li>We are reiterating our Buy rating, price target and projections for Starco Brands with the company announcing 2Q24 (June) results after the close on Tuesday.</li><li>We believe, after resetting near-term expectations in 1Q due to multiple expansions for key brands in 2H and 2025 and Whipshots slightly plateauing, the 2Q call will be focused on laying out the road map for material expansion on multiple levels/brands and the longer term positive implications.</li><li>We believe there remain multiple pathways to upside for the company over the longer-term and, the model of leveraging the company's manufacturing and marketing infrastructure remains fully intact.</li></ul>

We are reiterating our Buy rating, price target and projections for Starco Brands with the company announcing 2Q24 (June) results after the close on Tuesday.We believe, after resetting near-term expectations in 1Q due to multiple expansions for key brands in 2H and 2025 and Whipshots slightly plateauing, the 2Q call will be focused on laying out the road map for material expansion on multiple levels/brands and the longer term positive implications.We believe there remain multiple pathways to upside for the company over the longer-term and, the model of leveraging the company's manufacturing and marketing infrastructure remains fully intact.

elf Beauty Inc - STCB: 2Q Preview: Putting the Building Blocks Together; Reiterate Buy, PT

Betterware de Mexico Sab de CV / Equity Bottom-Up

<ul><li>We are reiterating our Buy rating and $22.50 price target and slightly raising our projections after Betterware registered below consensus 2Q24 results, but reiterated their 2024 guidance.</li><li>Further, while we view the 2Q miss as driven by product shortages and shipping issues which are, in the near-term, somewhat out of management's control, we believe there were more than enough key positives, from continued turn in orders and top line at Betterware Mexico, further double-digit gains at JAFRA Mexico, earlier than expected turn at JAFRA USA and the start of expansion into the United States, for us to remain positive on BWMX and, with a dividend yield of over 9% to reiterate or Buy rating and $22.50 price target.</li></ul>

We are reiterating our Buy rating and $22.50 price target and slightly raising our projections after Betterware registered below consensus 2Q24 results, but reiterated their 2024 guidance.Further, while we view the 2Q miss as driven by product shortages and shipping issues which are, in the near-term, somewhat out of management's control, we believe there were more than enough key positives, from continued turn in orders and top line at Betterware Mexico, further double-digit gains at JAFRA Mexico, earlier than expected turn at JAFRA USA and the start of expansion into the United States, for us to remain positive on BWMX and, with a dividend yield of over 9% to reiterate or Buy rating and $22.50 price target.

BWMX: 2Q Review: Managing Into the Positives; Reiterate Buy, $22.50 PT

<ul><li>We are reiterating our Buy rating, $22.50 price targe and projections for Betterware de Mexico with the company reporting 2Q24 (June) results after the close on Thursday.</li><li>We believe, while the Betterware division may be a drag (due primarily to foreign exchange), JAFRA continued to shine and the expansion into the United States has slowly begun to gain momentum at both Betterware and JAFRA.</li><li>Further, we expect management to remain positive over key trends and for the company to once again reiterate overall guidance for 2024.</li></ul>

We are reiterating our Buy rating, $22.50 price targe and projections for Betterware de Mexico with the company reporting 2Q24 (June) results after the close on Thursday.We believe, while the Betterware division may be a drag (due primarily to foreign exchange), JAFRA continued to shine and the expansion into the United States has slowly begun to gain momentum at both Betterware and JAFRA.Further, we expect management to remain positive over key trends and for the company to once again reiterate overall guidance for 2024.

BWMX: 2Q Preview: Another Quarter of Strong Proof; Reiterate Buy, $22.50 PT

United States

The Estee Lauder Companies Inc. manufactures and markets a wide range of skin care, makeup, fragrance, and hair care products.  The Company's products are sold in countries and territories around the world.

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Estee Lauder Companies Cl A (EL US)

EL: Turnaround Progressing; Raising Our Annual EPS Estimates

EL reported a 4QFY26 upside surprise and the stock traded up more than 15%. Sales were +6.8% to $3,640M, with organic sales...

Water Tower Research

elf Beauty Inc - STCB: 2Q Review: Adding Costco, Planning for the Future, Reiterate Buy

We are reiterating our Buy rating and $0.25 price target, but reducing our projections after Starco Brands posted a lower than expected 2Q24 and...

Small Cap Consumer Research

elf Beauty Inc - STCB: 2Q Preview: Putting the Building Blocks Together; Reiterate Buy, PT

We are reiterating our Buy rating, price target and projections for Starco Brands with the company announcing 2Q24 (June) results after the close...

Small Cap Consumer Research

BWMX: 2Q Review: Managing Into the Positives; Reiterate Buy, $22.50 PT

We are reiterating our Buy rating and $22.50 price target and slightly raising our projections after Betterware registered below consensus 2Q24...

Small Cap Consumer Research

BWMX: 2Q Preview: Another Quarter of Strong Proof; Reiterate Buy, $22.50 PT

We are reiterating our Buy rating, $22.50 price targe and projections for Betterware de Mexico with the company reporting 2Q24 (June) results...

Small Cap Consumer Research

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