There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

June 28, 2010 - The Estee Lauder Companies Inc. (EL-NYSE) engage in the manufacture, marketing, and sale of skin care, makeup, fragrance, and hair care products worldwide. It offers skin care products, including moisturizers, creams, lotions, cleansers, sun screens, and self-tanning products; and makeup products, lipsticks, lip glosses, mascaras, foundations, eye shadows, nail polishes, and powders, as well as related items, such as compacts, brushes, and other makeup tools.

The Estee Lauder Companies sells under the Estee Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, M A C, Bobbi Brown, La Mer, Aveda, Jo Malone, Bumble and bumble, Darphin, American Beauty, Flirt!, Good Skin, Grassroots, and Ojon brand names.

It also operates as a licensee for fragrances and/or cosmetics sold under the Tommy Hilfiger, Kiton, Donna Karan, Michael Kors, Sean John, Missoni, Daisy Fuentes, Tom Ford, and Mustang brand names.

The company sells through department stores, specialty retailers, upscale perfumeries, pharmacies, salons, and spas, as well as through company-owned stores, spas, and Web sites; authorized retailer Web sites; stores on cruise ships; in-flight and duty-free shops; and self-select outlets. The Estee Lauder Companies Inc. was founded in 1946 and is based in New York, New York.

Revenues and earnings took a hit in 2009, taking sales from $7.910 billion to $7.323 billion. Earnings per share went from $2.40 to $1.41. As you might imagine, the stock followed the same pattern, going from $54.80 in 2008 to a low of $19.80 in 2009. But after hitting bottom, the stock hasn't looked back and reached an all-time high of $71.30 earlier this year. Now that it's trading about 20% below that level, can it go back to its high....and keep going?

Revenues are back on track. 14 analysts see this year's total sales at $7.79 billion, then $8.10 billion next year. As for earnings, 18 analysts forecast $2.76 this year and $3.18 next year. Fourth quarter earnings are due out on August 12 (fiscal year ends June 30). Look for 30 cents a share vs. 20 cents in last year's final quarter.

The company has been adding new companies to its portfolio. In May it agreed to buy Smashbox Beauty Cosmetics Inc., a privately held cosmetics firm in Los Angeles. The company made a place for itself with prestige cosmetics and assisted open-sell markets and specialty distribution channels, especially to younger consumers. It should help Estee Lauder reach new customers and complement its prestige lines. Look for the deal to close soon and be accretive to earnings before transaction and integration costs by next year.

The company is taking debt off the books. It recently finished a debt tender offer for up to $200 million of its 6% senior notes due in 2012 and its 7.75% senior notes due in 2013. Within a month the offer expired and about $210 million worth of the bonds were retired. That purchase will save the company between $10 million and $11 million in interest payments in fiscal 2011.

More numbers: Trailing P/E is 25.61 but Forward P/E is 17.52. Price to sales ratio is 1.47. Price to book is 5.39. Operating margin for the last 12 months was 12.42% while Profit margin was 5.71%. Return on equity was 23.42% while Return on assets was 10.87%. Total cash is $1.38 billion or $6.94 a share. Total debt is $1.42 billion or 46% of capital. Current ratio is 2.15. Book value is $10.44. There are 199.03 million shares outstanding with a Float of 109.07 million. Insiders own 5.11% while institutions have 91.1%. There is a 55 cents annual dividend for a yield of 1%. It takes 25% of earnings to pay. The dividend is paid once a year in December. The ex-dividend date is at the end of November. Value Line gives the stock an A rating for Financial Strength.

Conservative investors will like the strong cash position, the rebound in earnings and a solid balance sheet. But the stock has moved up quite a bit in a short time. While it's pulled back from its recent high, it might be wise to see this quarter's earnings (due in August) before seriously considering this stock. With a relatively high Beta, it's a stock that can move dramatically, up....or down.

- Company Web site: www.elcompanies.com

Ted Allrich