Estée Lauder Cos. Inc. (NYSE:EL)

The financial data reveals distinct trends in the current and deferred income tax expenses over a six-year period ending June 30, 2023.

Current Income Tax Expense

The current income tax expense exhibits variability throughout the analyzed period. Starting at 688 million USD in mid-2018, it decreased to 579 million USD in mid-2019 and further declined to 493 million USD as of mid-2020. Subsequently, it rebounded to 686 million USD in mid-2021 and increased again to reach a peak of 777 million USD in mid-2022. However, this upward trend reversed in the last period, with the current tax expense dropping to 573 million USD by mid-2023. Overall, current income tax expense shows volatility with a notable peak in 2022, followed by a significant decline in 2023.

Deferred Income Tax Expense

In contrast to the current tax expense, deferred income taxes display a consistent negative trend starting from a positive 175 million USD in 2018. From 2019 onward, the deferred tax values are negative, with larger negative values occurring in 2020 (-143 million USD), 2021 (-230 million USD), followed by a somewhat lower negative figure in 2022 (-149 million USD), and a slight increase in negativity again in 2023 (-186 million USD). This pattern indicates an increasing deferred tax benefit or reduction in tax liabilities over time, with notable fluctuations after the transition to negative values starting in 2019.

Provision for Income Taxes

The overall provision for income taxes, representing the combined total of current and deferred items, mirrors the variability evident in its components. It starts at 863 million USD in 2018, sharply declines to 513 million USD in 2019, and continues falling to 350 million USD in 2020. Thereafter, it rises to 456 million USD in 2021 and further to 628 million USD in 2022 before dropping substantially to 387 million USD in 2023. The trend suggests a considerable degree of volatility in total income tax provision influenced by the opposing shifts in current and deferred tax expenses.

In summary, while current income tax expenses generally fluctuate with a peak in 2022 and a sharp decline in 2023, deferred income taxes have transitioned from a positive number to consistent negative values, signifying increased deferred tax assets or liabilities over the years. The total provision for income taxes reflects these movements, indicating the combined effect of both current tax payments and deferred tax adjustments on the company's effective tax obligations.

Provision for income taxes at statutory rate

The statutory tax rate remained stable at 21% from 2019 through 2023, with a higher rate of 28.1% observed only in 2018. This shows a tax policy or regulatory change took effect after 2018, establishing a consistent baseline rate.

State and local income taxes, net of federal tax benefit

These taxes fluctuated modestly around zero, ranging from -0.1% to 0.7%, indicating minor variations in local tax burdens or benefits over the years without a clear trend.

Stock-based compensation arrangements, excess tax benefits, net

There is a notable impact from stock-based compensation on tax benefits, with negative values throughout, reflecting reductions in taxable income due to compensation. The maximum negative effect occurred in 2020 (-7.5%), with a decrease in absolute impact to -0.8% by 2023, suggesting a reduction in related tax benefits or changes in compensation practices.

Previously held equity method investment gain, DECIEM

This item appears only in 2021 with a significant negative impact of -5.3%, indicating a one-time adjustment related to investment gains that reduced the effective tax rate that year.

GILTI, High-Tax Exception election, adjustment for prior years

A one-time tax adjustment of -1.4% is recorded in 2021, reflecting effects of global intangible low-taxed income provisions and election adjustments impacting that fiscal year.

Taxation of foreign operations

The taxation impact from foreign operations shows considerable volatility, ranging from a negative effect of -4.7% in 2018 to positive contributions up to 11% in 2020 and 8.6% in 2023. This suggests shifting geographic profit mixes, tax rates, or benefits related to offshore earnings.

Income tax reserve adjustments

These adjustments remained close to zero, fluctuating between -0.5% and 0.5%, indicating relatively stable reserve management without major tax uncertainties or corrections.

Nondeductible goodwill impairment charges

Appearing sporadically, significant impact occurred in 2020 (8%) and 2019 (0.6%), with negligible or no amounts in other years. This implies occasional goodwill impairments that increased taxable income and thus effective tax rate.

Other, net

Minor and inconsistent effects are recorded in this category with small positive or negative percentages, including a notable -1.3% in 2023. These likely represent miscellaneous tax items without clear trends.

Effective tax rate, before TCJA net income tax impact

The effective tax rate excluding the Tax Cuts and Jobs Act impact varies widely: low of 13.7% in 2021 to a high of 33.5% in 2020, showing considerable tax rate fluctuations possibly due to changes in taxable income composition, tax planning, or one-time effects.

TCJA net income tax impact

This impact is influential only in 2018 and 2019 (22.8% and 0.2% respectively), reflecting the timing effect of the Tax Cuts and Jobs Act, with no further impact afterward.

Effective tax rate

The overall effective tax rate mirrors fluctuations influenced by the TCJA initially and subsequent variability between 13.7% and 33.5% from 2019 onward. The highest effective rate was in 2018 (43.6%) due to TCJA effects, with a reduction and relative stabilization near 20-28% in later years, suggesting normalization of tax burdens post-reform.

Compensation-related expenses

The expenses showed a general increase from 161 million US dollars in mid-2018 to a peak of 210 million in mid-2021, followed by a decline to 189 million by mid-2023. This indicates initial growth in compensation costs with some reduction in recent years.

Inventory obsolescence and other inventory related reserves

This category exhibited an upward trend from 57 million in 2018 to 75 million in 2020, then fluctuated, dipping to 59 million in 2022 before rising again to 75 million in 2023, suggesting variable but overall increasing inventory-related reserves.

Retirement benefit obligations

The retirement-related obligations increased sharply from 45 million in 2018 to 71 million in 2019 and remained stable through 2020, then declined to 42 million in 2022 before rising to 60 million in 2023, showing some volatility in obligations over the period.

Various accruals not currently deductible

These accruals presented a steady upward trend from 175 million in 2018 to 269 million in 2022, followed by a decline to 225 million in 2023, indicating increased accruals with a recent partial reversal.

Net operating loss, credit and other carryforwards

This item rose substantially from 48 million in 2018 to 225 million in 2023, with consistent increases each year from 2019 onwards, reflective of growing net operating losses or credits available for future periods.

Unrecognized state tax benefits and accrued interest

The values remained relatively stable around 12-13 million throughout the timeframe, indicating minimal fluctuations in unrecognized state tax benefits.

Lease liabilities

From no data prior to 2020, lease liabilities appeared at 585 million in mid-2020, slightly increasing to 591 million in 2021, then progressively decreased to 479 million by 2023, showing initial recognition followed by reductions or repayments.

Research-related expenses

This expense was reported only in 2023 at 200 million, indicating new or separate recognition of research costs in the latest period.

Other differences between tax and financial statement values

This item showed considerable volatility with gross values increasing from 55 million in 2018 to a high of 217 million in 2020, then dropping to 26 million in 2022 before rising to 107 million in 2023. The negative corresponding deferred tax liabilities declined substantially over time, indicating adjustments between tax and financial reporting.

Deferred tax assets, gross

There was a marked increase from 553 million in 2018 to 1,412 million in 2020 with slight fluctuations thereafter, reaching 1,572 million in 2023, demonstrating a significant growth in expected future tax benefits from timing differences.

Valuation allowance for deferred tax assets

The valuation allowances increased in absolute terms from -45 million in 2018 to -200 million in 2023, reflecting heightened caution in realizing certain deferred tax assets over time.

Deferred tax assets

Net deferred tax assets rose from 508 million in 2018 to a peak of 1,305 million in 2020, declined moderately in 2021 and 2022, and increased again to 1,372 million in 2023, signifying overall growth in deferred tax asset recognition with some volatility.

Fixed assets and intangibles

The net deferred tax liability associated with fixed assets and intangibles narrowed from -338 million in 2018 to -204 million in 2022, but increased again to -264 million in 2023, indicating fluctuating tax impacts of fixed asset and intangible balances.

ROU assets

Recognized only from 2020, right-of-use assets generated deferred tax liabilities ranging from -504 million in 2020 to -432 million in 2023, showing a gradual decrease over the period.

Partnership interest in DECIEM

This deferred tax liability decreased from -467 million in 2020 to -404 million in 2023, indicating a reduction in the tax impact related to this partnership interest.

Other differences between tax and financial statement values (negative values)

The corresponding deferred tax liabilities related to other differences became increasingly negative from -50 million in 2018 to -194 million in 2020, then decreased sharply to -32 million by 2023, reflecting significant adjustments and reversals.

Deferred tax liabilities

Deferred tax liabilities surged from -388 million in 2018 to -1,471 million in 2021 before decreasing to -1,132 million in 2023, showing significant growth and subsequent partial unwinding of tax liabilities.

Net deferred tax assets (liabilities)

The net deferred tax position moved from a positive 120 million in 2018 to a negative 218 million in 2021, before recovering to a positive 240 million in 2023, indicating swings in the overall deferred tax balance with improvement in the most recent period.

Deferred Tax Assets

The deferred tax assets demonstrate a consistent upward trend over the six-year period from June 30, 2018, to June 30, 2023. Starting at 120 million USD in 2018, these assets increased significantly each year, reaching 860 million USD by 2023. This represents a more than sevenfold increase, indicating a growing recognition of deductible temporary differences or carryforwards that could reduce future tax liabilities.

Deferred Tax Liabilities

Data for deferred tax liabilities is partially missing for the years 2018 and 2019. However, from 2020 onward, liabilities are recorded and show substantial fluctuations. They increased sharply from 399 million USD in 2020 to 849 million USD in 2021, then decreased to 692 million USD in 2022, followed by a further decrease to 620 million USD in 2023. This volatility suggests varying timing differences affecting taxable income and could reflect changes in the company's asset base or tax planning strategies.

Comparative Insights

Across the period, while deferred tax assets increased steadily, deferred tax liabilities exhibited more variability. The continuing growth in deferred tax assets alongside a fluctuating liability position may imply strengthening future tax benefits relative to deferred tax obligations. Overall, the net deferred tax position appears to have improved in favor of deferred tax assets, potentially enhancing the company's tax position in forthcoming periods.

The financial data reveals several significant trends over the six-year period from mid-2018 to mid-2023.

Total Assets

Both reported and adjusted total assets increased substantially over the period, with reported assets rising from $12,567 million in 2018 to $23,415 million in 2023. Adjusted total assets followed a similar trend, increasing from $12,447 million to $22,555 million. This growth indicates an overall expansion in the asset base, with a notable jump between 2019 and 2021, despite a slight dip in 2022 before increasing again in 2023.

Total Liabilities

Reported total liabilities showed a strong upward trend, moving from $7,857 million in 2018 to $16,998 million in 2023. Adjusted liabilities also increased, growing from $7,857 million to $16,378 million in the same timeframe. Both measures peaked in 2021 and 2023, suggesting increased financial obligations paralleling the growth in assets. The adjusted liabilities are consistently lower than reported liabilities from 2020 onward, reflecting accounting adjustments possibly related to deferred tax considerations.

Stockholders’ Equity

Stockholders’ equity presented a more volatile pattern. Reported equity decreased from $4,688 million in 2018 to a low of $3,935 million in 2020, then sharply increased to $6,057 million in 2021 before declining to $5,585 million in 2023. Adjusted equity exhibited similar fluctuations, with a decrease to $3,891 million in 2020, a peak at $6,275 million in 2021, and a decline to $5,345 million by 2023. The volatility likely reflects fluctuations in earnings and possibly equity restructuring or other accounting effects over the period.

Net Earnings Attributable to The Estée Lauder Companies Inc.

Reported net earnings showed notable volatility. After increasing from $1,108 million in 2018 to $1,785 million in 2019, earnings plummeted to $684 million in 2020, possibly reflecting global economic challenges during that year. This was followed by a substantial recovery to $2,870 million in 2021. However, net earnings declined again to $1,006 million by 2023. Adjusted net earnings reveal a similar pattern but with less pronounced peaks and troughs, ranging from $1,283 million in 2018 to a low of $541 million in 2020, rebounding to $2,640 million in 2021, and falling to $820 million in 2023. The adjusted figures suggest that certain items, likely related to deferred tax adjustments, impact the variability of reported earnings.

In summary, the organization experienced strong asset and liability growth over the period, with marked earnings volatility, particularly around 2020 and a robust recovery in 2021. Equity levels fluctuated notably, likely influenced by the variability in earnings and other accounting adjustments. The differences between reported and adjusted figures highlight the impact of deferred income tax considerations on the financial position and performance metrics.

The analysis of the financial metrics over the six-year period reveals several noteworthy trends in profitability, asset utilization, leverage, and returns.

Net Profit Margin

Both reported and adjusted net profit margins experienced significant fluctuations. Initially, margins rose from about 8.1% to around 12% between 2018 and 2019, followed by a sharp decline in 2020 to approximately 3.78%–4.79%. Subsequently, a recovery occurred in 2021 with margins peaking near 16%–17.7%, before declining again in 2022 and 2023, ending at roughly 5.15%–6.32%. This volatility indicates sensitivity to external or operational conditions affecting profitability.

Total Asset Turnover

The total asset turnover ratio showed a gradual decline over the period. Starting near 1.09–1.10 in 2018, it dropped substantially in 2020 to around 0.80–0.82 and remained below 0.90 thereafter, hitting a low close to 0.68–0.71 in 2023. This decrease suggests diminishing efficiency in utilizing assets to generate sales.

Financial Leverage

Financial leverage ratios demonstrated an increasing trend over the period. From approximately 2.68–2.72 in 2018, leverage rose steadily with a notable spike in 2020 to about 4.46–4.52, followed by some fluctuation but maintaining higher levels above 3.4 and peaking again near 4.19–4.22 in 2023. This indicates a growing reliance on debt or other forms of financial obligations, which may raise risk but potentially amplify returns.

Return on Equity (ROE)

ROE exhibited pronounced volatility. After a strong increase from roughly 23.6% to over 40% by 2019, it dropped sharply in 2020 to levels near 13.9%–17.4%. ROE rebounded robustly in 2021 to exceed 42% reported and 42% adjusted, then slightly decreased in 2022 while remaining above 40%. However, by 2023, ROE fell significantly to approximately 15.3%–18%. This pattern reflects fluctuations in profitability and leverage, with periods of strong value creation followed by marked contractions.

Return on Assets (ROA)

ROA mirrored the patterns seen with net profit margin and asset turnover, declining sharply in 2020 to low single digits (around 3.1%–3.85%) from previous double-digit highs (about 8.8%–10.3% in 2018 and above 13% in 2019). It recovered somewhat in 2021 and 2022 to levels above 11%, but decreased again in 2023 to roughly 3.6%–4.3%. This indicates variability in asset profitability and operational effectiveness.

Overall, the data points to a cycle of strong financial performance in 2019 and 2021, interrupted by significant downturns particularly in 2020 and 2023. Asset utilization efficiency declined steadily, while leverage increased, potentially compensating for asset turnover reductions and contributing to highly variable but sometimes elevated equity returns. The company appears to have faced challenges negatively impacting profitability and return measures in specific periods, followed by partial recoveries.

The financial data reveals fluctuating trends in reported and adjusted net earnings attributable to the company over the six-year period ending June 30, 2023. Reported net earnings peaked in the year ended June 30, 2021, reaching 2,870 million US dollars, followed by a declining trajectory in subsequent years, notably dropping to 1,006 million in the year ended June 30, 2023. Similarly, adjusted net earnings exhibit a comparable pattern, with a high of 2,640 million in 2021 and a subsequent decrease to 820 million by 2023.

In terms of profitability, the reported net profit margin also experienced its highest level in 2021 at 17.7%, reflecting strong earnings relative to revenue. This margin, however, decreased significantly to 6.32% by 2023. The adjusted net profit margin follows a similar pattern, peaking at 16.28% in 2021 and declining to 5.15% in the latest reported period.

Both reported and adjusted figures indicate considerable volatility, with the years 2020 and 2023 showing notable dips, suggesting external or internal factors impacting profitability and earnings capacity during these intervals. The alignment between reported and adjusted data suggests consistency in the underlying operational results, despite adjustments made for deferred or other income tax effects.

Reported Net Earnings Trend

General upward movement until 2021, followed by a strong decline thereafter.

Adjusted Net Earnings Trend

Similar pattern to reported earnings with a peak in 2021 and pronounced decreases afterward.

Reported Net Profit Margin Trend

Reached the highest margin in 2021, then contracted considerably by 2023.

Adjusted Net Profit Margin Trend

Mirrors the reported margins, peaking in 2021 and declining steadily through 2023.

Overall Insight

The company experienced strong profitability and earnings growth through mid-2021, followed by a significant downturn in both earnings and margins, indicating potential challenges in sustaining profitability in the subsequent years.

The analysis of the annual data indicates notable trends in both asset size and asset utilization efficiency over the examined period.

Total Assets

There is a clear upward trajectory in total assets, both reported and adjusted, from 2018 through 2023. Reported total assets increased from approximately $12.6 billion in mid-2018 to about $23.4 billion in mid-2023. Adjusted total assets show a similar pattern, rising from roughly $12.4 billion to $22.6 billion over the same period. The increments suggest sustained investment or accumulation of resources over the six-year span, despite a minor dip observed around 2022 compared to 2021, followed by a recovery in 2023.

Total Asset Turnover

Conversely, total asset turnover ratios, which measure the efficiency of asset use to generate sales, reveal a declining trend. Reported turnover fell from 1.09 in 2018 to 0.68 by 2023. Adjusted turnover values mirror this decrease, dropping from 1.10 to 0.71 in the same timeframe. Although there was a marginal improvement in turnover ratios in 2022 compared to 2021, the overall trajectory points to diminishing asset utilization efficiency.

In summary, while the company has expanded its asset base significantly, the capacity of these assets to generate sales has lessened, as reflected in the decreasing turnover ratios. This pattern could imply challenges in leveraging the increased asset base effectively or potential shifts in operational strategy requiring further investigation.

The data reveals several notable trends in the reported and deferred income tax adjusted financial metrics over the six-year period.

Total Assets

There is a consistent upward trend in both reported and adjusted total assets from 2018 through 2023, indicating growth in the company's asset base. Reported total assets increased from $12,567 million in 2018 to $23,415 million in 2023, while adjusted total assets showed a similar pattern, rising from $12,447 million to $22,555 million during the same timeframe. This growth reflects an overall expansion of the company’s resources over the period.

Stockholders’ Equity

Reported stockholders’ equity declined from $4,688 million in 2018 to $3,935 million in 2020, suggesting a weakening equity position in the early years. However, a notable rebound occurred in 2021 when equity jumped to $6,057 million, before slightly decreasing in 2022 and 2023 to $5,590 million and $5,585 million respectively. Adjusted stockholders’ equity follows a similar trend, decreasing initially and then rising sharply in 2021, albeit with a slight decline thereafter. This volatility in equity could reflect changes in retained earnings, revaluation impacts, or other equity adjustments.

Financial Leverage

The reported financial leverage ratio shows an increasing trend overall, starting at 2.68 in 2018, peaking at 4.52 in 2020, then fluctuating around the 3.6 to 4.2 range through to 2023. Adjusted financial leverage mirrors this pattern, with a significant rise to 4.46 in 2020 followed by some moderation and another increase to 4.22 in 2023. These leverage ratios indicate the company has been increasingly relying on debt relative to equity, particularly notable in the 2020 period where leverage was highest.

Overall, the data illustrates growth in asset base accompanied by fluctuating equity levels and increased leverage, signaling a possible strategic use of debt financing during expansion phases. The adjustments made for deferred income taxes slightly moderate the totals but maintain consistent directional trends across all financial indicators.

The financial data demonstrates notable fluctuations in both earnings and equity over the six-year period. Reported net earnings attributable to the company exhibited a generally cyclical pattern, initially increasing significantly from 1108 million USD in mid-2018 to 1785 million USD in 2019, followed by a sharp decline to 684 million USD in 2020. Subsequently, earnings surged again to a peak of 2870 million USD in 2021, before declining to 2390 million USD in 2022 and further dropping to 1006 million USD in 2023.

The adjusted net earnings show a broadly similar trend, with levels rising from 1283 million USD in 2018 to 1719 million USD in 2019, then decreasing notably to 541 million USD in 2020. Following this, earnings increased markedly to 2640 million USD in 2021, slightly decreased to 2241 million USD in 2022, and declined further to 820 million USD in 2023. The adjusted figures tend to be somewhat lower than reported values in the majority of years, indicating the impact of adjustments on profitability reporting.

In terms of stockholders’ equity, both reported and adjusted values reveal fluctuating but generally stable trends. Reported equity decreased from 4688 million USD in 2018 to 3935 million USD in 2020, before rising sharply to 6057 million USD in 2021. This was followed by a decrease to 5590 million USD in 2022 and a slight decline to 5585 million USD in 2023. Adjusted equity follows a similar trajectory with values dipping from 4568 million USD in 2018 to 3891 million USD in 2020, peaking at 6275 million USD in 2021, then declining to 5587 million USD in 2022 and further to 5345 million USD in 2023.

The return on equity (ROE), both reported and adjusted, mirrors these fluctuations with notable volatility. Reported ROE increased from 23.63% in 2018 to a high of 40.7% in 2019, then declined significantly to 17.38% in 2020 before peaking sharply at 47.38% in 2021. The ratio decreased moderately to 42.75% in 2022 and then more substantially to 18.01% in 2023. Adjusted ROE followed a comparable pattern, rising from 28.09% in 2018 to 42.02% in 2019, dropping to 13.9% in 2020, then increasing to 42.07% in 2021, 40.11% in 2022, and finally declining to 15.34% in 2023.

Overall, the data indicates a period of strong recovery and growth in 2021 following earlier declines, with marked reductions in profitability and returns in the most recent year. The adjustments applied slightly moderate these figures but maintain the overall trend. Equity levels have been less volatile but still reflect the fluctuations in earnings and returns, underscoring the influence of earnings variations on the company's financial position over time.

The analysis of the financial data reveals notable fluctuations and trends across the reported and adjusted metrics over the six-year period ending June 30, 2023.

Net Earnings

Reported net earnings attributable to the company exhibit significant volatility, with a peak recorded in 2021 at 2,870 million US dollars, followed by a sharp decrease to 1,006 million in 2023. Adjusted net earnings follow a similar pattern but with generally lower values, indicating that adjustments reduce reported profitability. The adjusted net earnings also peak in 2021 at 2,640 million, then decline markedly to 820 million by 2023. Overall, net earnings demonstrate recovery after a significant drop in 2020, but the most recent figures suggest a downward trend post-2021.

Total Assets

Both reported and adjusted total assets show a consistent upward trend from 2018 through 2023, reflecting growth in asset base. Reported total assets increase from 12,567 million in 2018 to 23,415 million in 2023, while adjusted assets move in a parallel trajectory, rising from 12,447 million to 22,555 million over the same period. This steady increase indicates continuous investment or acquisition activity, although a slight dip in total assets is observed between 2021 and 2022 before assets rebound in 2023.

Return on Assets (ROA)

Reported ROA percentages fluctuate significantly, with a low point in 2020 at 3.85% amidst a general range around double digits in other years. After rising sharply to 13.06% in 2021, the ROA declines again to 4.3% by 2023. The adjusted ROA mirrors this volatility but consistently registers slightly lower values than the reported figures, highlighting the impact of adjustments on profitability metrics. The trends in ROA reflect the earnings volatility relative to asset growth and suggest challenges in maintaining efficiency in asset utilization during periods of earnings decline.

In summary, the company's asset base has grown steadily over the reported years, signifying expansion or accumulation of resources. However, net earnings and return on assets demonstrate notable variability, with earnings peaking strongly in 2021 before diminishing, and profitability ratios reflecting this instability. The adjusted figures consistently indicate a conservative perspective on profitability compared to reported numbers, reinforcing the presence of significant adjustments affecting net earnings and performance metrics.