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Good morning! Here’s the latest in trending:
Hormuz crisis: Bahrain pitches a UN resolution and Gulf states weigh joining the war.
Trade diversification: The EU and Australia strike a free trade deal, including critical mineral access.
LaGuardia tragedy: Air Canada responds to fatal runway crash that killed both pilots.
Two of the world’s biggest beauty companies may soon be getting together. Estée Lauder (EL) has confirmed it’s in talks to acquire Spain’s Puig (PUIGF) in a potential cash-and-stock transaction that would be valued north of $10B. The move would be a big deal for the firm, which is facing weak demand in the Americas and a double punch from tariffs and inflation. Puig stock jumps
Backdrop: Organic growth has become harder to find in recent years following the post-pandemic spending boom. Companies are looking to consolidate, especially given growing competition in the beauty arena, where Gucci owner Kering (PPRUY) just sold its beauty business to L’Oréal (LRLCY). Coty (COTY) is also conducting a strategic review, while Elf Beauty (ELF) shelled out big bucks for Hailey Bieber’s skincare brand Rhode. Estée Lauder’s (EL) deal for Puig would immediately vault it into a global leader in high-growth fragrances (such as Carolina Herrera and Rabanne), while leveraging makeup brands like Charlotte Tilbury into Estée’s (EL) massive distribution network (Clinique and M.A.C).
Shares of Estee (EL) sank nearly 8% on Monday following the news that broke just before the closing bell. Investors seemed concerned about the risks involved for such a big acquisition and the financing that it would take to add more brands to its sprawling portfolio. Estée already spent $2.8B on a deal for Tom Ford several years back, and while the strategic acquisition boosted its prestige portfolio by upending a sale to Kering, the long-term investment hasn’t yet paid back financially.
Outlook: Estée Lauder’s shares have been in a downtrend for years, slumping 80% from their all-time high in late 2021, and a whopping 25% in 2026 alone. It has attempted a turnaround plan called “Beauty Reimagined” that aims to cut costs and utilize supply chain efficiencies to fund a pivot toward the digital growth channels of younger consumers, like Amazon and TikTok. “The stock’s high market risk should be taken into account, as the equity market poses a threat for high-beta stocks,” SA analyst Vladimir Dimitrov writes in Estée Lauder: The Storm Is Finally Over, But There Are Risks Involved.
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What else is happening…
WSB survey results: Defense the next sector winner of Iran war?
Zillow (Z) inks multiyear partnership with Major League Baseball.
Sen. Hawley investigating Fair Isaac’s (FICO) credit score pricing.
OPENAI flags Microsoft (MSFT) as key risk in investor document.
Supply bottleneck? Broadcom flags TSMC (TSM) capacity limits.
U.S. weighs 82nd Airborne deployment to support Iran operations.
Middle East war shows need for energy diversification – Cheniere.
TotalEnergies (TTE) reaches deal to end U.S. offshore wind projects.
BNP: Lumentum’s (LITE) design wins pave way for $1K share price.
U.S. bans new foreign-made Wi-Fi routers over national security risks.
Today’s Markets
In Asia, Japan +1.4%. Hong Kong +2.8%. China +1.8%. India +1.9%.
In Europe, at midday, London flat. Paris -0.2%. Frankfurt -0.2%.
Futures at 6:30, Dow -0.1%. S&P flat. Nasdaq +0.1%. Crude +1.8% to $89.70. Gold +0.5% to $4,429.50. Bitcoin +3.9% to $71,132.
Ten-year Treasury Yield +2 bps to 4.38%.
On The Calendar
Companies reporting today include GameStop (GME) and AAR (AIR).
See the full earnings calendar on Seeking Alpha, as well as today’s economic calendar.