Why e.l.f. Beauty Stock Sparkled This Week

Shares of e.l.f Beauty (NYSE: ELF) erased some of their year-to-date losses this week. The makeup products stock rose 13% through Thursday trading, according to data provided by S&P Global Market Intelligence, easily beating the 4.3% surge in the S&P 500.

That broad market rally played a role in e.l.f Beauty's stock price spike. However, the bigger factor was the cosmetic specialist's Wednesday earnings report that showed improving operating and financial trends.

Strong demand

Sales rose 40% to cross $300 million, on strength in both the U.S. and international markets, the company revealed late Wednesday. E.l.f Beauty gained market share in its fiscal Q2 period and extended its record of sales growth to 23 consecutive quarters. Executives credited the popular assortment of color cosmetics and skincare products that helped keep consumers engaged with the brand. "We ... believe our unique areas of advantage will fuel our ability to win in fiscal 2025 and beyond," CEO Tarang Amin said in a press release.

The company did have to spend more on marketing and on other selling expenses to secure those market share wins, and promotions remained a factor. Profitability declined as a result, with per-share earnings falling to $0.34 per share from $0.61 per share a year ago. Those declines reflect a continued promotional environment in the cosmetics industry.

Prettier results

Still, executives took the opportunity to raise their sales and earnings outlook for fiscal 2025. Revenue is now on track to reach between $1.315 billion and $1.335 billion, up from the prior forecast range of $1.28 billion to $1.3 billion. Similarly, earnings should now land between $205 million and $209 million, up from the previous expectation of $198 million to $201 million.

That upgrade, plus continued market share gains, explains why e.l.f. Beauty stock outperformed the market this past week. The question going forward is whether those wins will translate into durable earnings growth in the highly competitive cosmetics industry.

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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends e.l.f. Beauty. The Motley Fool has a disclosure policy.