Estee Lauder. CONSUMER PACKAGED GOODS RESEARCH November 2, Momentum Should Continue - Raising Estimates/ Target, Remains a Top Growth Pick

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1 Global Equity Research Company Note Earnings Update CONSUMER PACKAGED GOODS RESEARCH Estee Lauder Momentum Should Continue - Raising Estimates/ Target, Remains a Top Growth Pick KEY TAKEAWAYS Margin pressures receding & reinvesting upside should perpetuate best-in-class organic. Fx should help margins after exerting pressure the last three years. Margin mix is improving as highest margin category (Skin Care) and high margin countries (China & HK) re-accelerate. Acquisition accounting pressure should also drop off as we lap acquisition of Too Faced & Becca in Dec-Q. We expect Estee to reinvest upside behind growth (innovation, digital spend, e-commerce, own-retail, niche brands), perpetuating best-in-class organic & potentially making our top-line estimates conservative. Too Faced & Becca inorganic contribution ceases but organic growth should be strong. GlamGlow is still growing extremely well 2+ years post-acquisition. Too Faced & Becca have similar potential, given strong innovation, sophisticated digital presence, and loyal Millennial following. Both should see continued benefits from channel & geographic expansion as well as stepped-up innovation in F18 and beyond. Estee has a great track record integrating niche, edgy brands. MAC and Bobbi Brown, for example, are still edgy ~2 decades post-acquisition. All eyes on Holiday. For the Holiday season, compelling programs should drive traffic and support the business. Estee has called out desirable sets at Clinique and MAC's Snow Ball Collection, for example. Their early confidence in Holiday assortments helps underpin 10% to 11% organic guidance for the Dec-Q. Given the importance of Holiday to the quarter, however, there's likely an element of conservatism in the numbers. Estee still a top growth pick, target now $135 ($121 prior). Clinique & Lauder improvement will boost organic; MAC is healthier than market thinks; M&A helps growth & competencies; channel diversification is accelerating; & productivity offsets higher cost of growth. Ratings Stock Rating: Overweight Industry View: Neutral Target Price: $ Financial Data Symbol: EL (NYSE) Rating/Target Price: OW / $ Price (11/01/2017): $ Week Price Range: $ $ Diluted Shares Outstanding (mm): 375 Market Cap (mm): $27,339 Average Daily Vol (mm): 1.8 Book Value/Share: $12.84 Dividend/Yield: 1.2% Net Debt (mm): $2,110 Price Performance Price Performance 1-year range Dec-16 EL Jan-17 Source: FactSet Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 EL: Quarterly and Annual EPS (USD) FY Jun 2017A Old New Cons Old New Cons Q1 Q2 Q3 Q4 Year 0.84A 1.22A 0.91A 0.51A 3.48A 0.95 NC A 1.38E 1.00E 0.66E 4.25E N/A 1.41E 1.01E 0.58E 4.01E 1.04 NC E 1.52E 1.18E 0.78E 4.77E 1.08E 1.55E 1.14E 0.66E 4.46E P/E x 28.7x 28.1x 25.6x Source: Renaissance Macro Research Consensus Estimates are from FactSet Refer to page 4 for important disclosures and Analyst Certification. RenMac and its affiliated companies do not seek to do business with the companies covered in this report. RenMac does not make a market in the security. The analyst does not own shares in the security. April Scee Consumer Packaged Goods april@renmac.com

2 THE ESTEE LAUDER COMPANIES (EL, OW, $135PT) Key Sept-Q Earnings Take-Aways Positives Category trends improved for the high-margin Skin Care category Lauder brand +DD overall and in both Skin Care and Fragrance Cont d acceleration in China & HK (up sharp DD), Travel Retail & online Makeup doubled in China; Tom Ford, MAC, Lab Series doubled in China Signs of improvement in some US prestige department stores Green shoots in MAC: very strong online, doubled in China/Asia Pac, sequential improvement in US, best-seller in Ulta (will expand initiative) GlamGlow still +DD 2yrs post-acquisition, bodes well for recent deals Management is excited about the programs to drive Holiday Too Faced & Becca in-line with expectations (beat was from core biz) Comments on margin potential seem more positive than current guide Negatives US down 3% ex-acquisitions Clinique down in both Skin Care and Makeup US Makeup down (Clinique, Bobbi Brown attributed to dept stores) MAC still down in the US Lower sales in Middle East (retailer inventory rebalance due to macro) Comparisons get tougher in back-half of 2018 Modest declines in Canada & LatAm Guidance Changes C$ Sales now guided +8-9% (7-8% prior) C$ EPS now guided 12-14% (9-11% prior) -- $4.04 to $4.12 Tax 26% v 27% prior (doesn t include future impact of new acct rule) 2pt benefit from currency (1pt prior) THE ESTEE LAUDER COMPANIES (EL, OW, $135PT) Revised Estimates Consolidated Results Source: Company reports, RenMac estimates. Model Changes F18 $4.25 vs $3.88 prior; unchanged at 8% F18 $4.77 vs $4.34 prior; unchanged at 7% F19 $5.41 vs $4.89 prior; unchanged at 7% $m 1Q15 A 2Q15 A 3Q15 A 4Q15 A 1Q16 A 2Q16 A 3Q16 A 4Q16 A 1Q17 A 2Q17 A 3Q17 A 4Q17 A 1Q18 A 2Q18 E 3Q18 E 4Q18 E 1Q19 E 2Q19 E 3Q19 E 4Q19 E FY18 E FY19 E FY20 E Net revenues $2,631 $3,045 $2,581 $2,524 $2,835 $3,125 $2,657 $2,646 $2,865 $3,208 $2,857 $2,894 $3,274 $3,657 $3,066 $3,047 $3,291 $3,811 $3,388 $3,371 $13,043 $13,861 $14,874 % local currency -1.0% 6.0% 8.0% 0.0% 15.0% 8.0% 6.0% 7.0% 2.0% 5.0% 9.0% 9.0% 14.0% 11.0% 4.0% 4.0% 1.0% 4.0% 11.0% 11.0% 8.0% 7.0% 7.0% Operating profit $348 $633 $403 $228 $453 $648 $399 $243 $444 $654 $489 $281 $602 $735 $534 $354 $626 $796 $619 $408 $2,225 $2,449 $2,733 % sales 13.2% 20.8% 15.6% 9.0% 16.0% 20.7% 15.0% 9.2% 15.5% 20.4% 17.1% 9.7% 18.4% 20.1% 17.4% 11.6% 19.0% 20.9% 18.3% 12.1% 17.1% 17.7% 18.4% E.P.S. (underlying) $0.59 $1.13 $0.72 $0.40 $0.82 $1.22 $0.73 $0.43 $0.84 $1.22 $0.91 $0.51 $1.21 $1.38 $1.00 $0.66 $1.28 $1.52 $1.18 $0.78 $4.25 $4.77 $5.41 Consolidated Growth Revenue -1.6% 0.9% 1.2% -7.4% 7.7% 2.6% 2.9% 4.8% 1.1% 2.7% 7.5% 9.4% 14.3% 14.0% 7.3% 5.3% 0.5% 4.2% 10.5% 10.6% 10.3% 6.3% 7.3% Operating Profit -22.8% -3.1% 5.9% -39.8% 30.2% 2.4% -0.8% 6.5% -2.0% 0.9% 22.5% 15.6% 35.6% 12.4% 9.3% 25.9% 4.0% 8.4% 15.8% 15.3% 19.1% 10.1% 11.6% Margin Expansion -362bp -84bp 69bp -488bp 276bp -5bp -57bp 14bp -49bp -35bp 209bp 52bp 289bp -29bp 31bp 190bp 63bp 80bp 84bp 49bp 126bp 61bp 71bp EPS -23.1% 3.7% 12.3% -39.5% 38.9% 8.1% 1.5% 8.7% 2.9% 0.1% 24.9% 17.7% 43.8% 13.3% 9.6% 29.6% 5.6% 10.0% 18.2% 18.7% 22.2% 12.0% 13.6% Segment Results ($m) Americas 1Q15 A 2Q15 A 3Q15 A 4Q15 A 1Q16 A 2Q16 A 3Q16 A 4Q16 A 1Q17 A 2Q17 A 3Q17 A 4Q17 A 1Q18 A 2Q18 E 3Q18 E 4Q18 E 1Q19 E 2Q19 E 3Q19 E 4Q19 E FY18 E FY19 E FY20 E Segment revenues $1,115 $1,201 $1,110 $1,088 $1,268 $1,227 $1,112 $1,103 $1,233 $1,242 $1,171 $1,173 $1,329 $1,304 $1,183 $1,173 $1,316 $1,317 $1,242 $1,243 $4,989 $5,118 $5,288 % local currency -6.0% 4.0% 8.0% 3.0% 17.0% 4.0% 2.0% 3.0% -2.0% 1.0% 5.0% 6.0% 7.0% 5.0% 1.0% 0.0% -1.0% 1.0% 5.0% 6.0% 3.3% 2.6% 3.3% Segment profit $57 $121 $110 $15 $91 $108 $112 $36 $63 $86 $87 $48 $100 $77 $88 $54 $106 $85 $98 $63 $319 $352 $380 % sales 5.1% 10.1% 9.9% 1.3% 7.1% 8.8% 10.0% 3.3% 5.1% 6.9% 7.4% 4.1% 7.5% 5.9% 7.4% 4.6% 8.0% 6.4% 7.9% 5.1% 6.4% 6.9% 7.2% Europe, ME & Africa Segment revenues $942 $1,212 $950 $982 $1,017 $1,268 $1,023 $1,073 $1,044 $1,307 $1,126 $1,173 $1,258 $1,581 $1,284 $1,337 $1,295 $1,707 $1,475 $1,483 $5,460 $5,960 $6,584 % local currency 5.0% 9.0% 10.0% -3.0% 19.0% 13.0% 11.0% 12.0% 7.0% 9.0% 13.0% 9.0% 18.0% 14.0% 7.0% 11.0% 3.9% 7.9% 14.9% 10.9% 12.4% 9.4% 10.5% Segment profit $170 $355 $204 $214 $244 $387 $212 $185 $256 $412 $288 $247 $346 $483 $328 $288 $363 $529 $385 $327 $1,445 $1,604 $1,795 % sales 18.0% 29.3% 21.5% 21.8% 24.0% 30.5% 20.7% 17.2% 24.5% 31.5% 25.6% 21.1% 27.5% 30.5% 25.6% 21.6% 28.0% 31.0% 26.1% 22.1% 26.5% 26.9% 27.3% Asia Pacific Segment revenues $574 $632 $520 $454 $550 $629 $522 $472 $590 $659 $560 $548 $687 $771 $599 $537 $680 $787 $671 $645 $2,594 $2,783 $3,002 % local currency -2.0% 2.0% 5.0% -2.0% 5.0% 6.0% 5.0% 6.0% 5.0% 5.0% 8.0% 16.0% 17.0% 15.0% 5.0% -3.0% 0.1% 2.1% 12.1% 20.1% 8.9% 7.6% 7.9% Segment profit $121 $157 $83 $0 $119 $154 $75 $24 $130 $160 $114 $13 $160 $179 $122 $15 $162 $187 $140 $22 $477 $511 $576 % sales 21.0% 24.8% 16.0% 0.0% 21.6% 24.4% 14.4% 5.1% 22.0% 24.3% 20.4% 2.4% 23.3% 23.3% 20.4% 2.9% 23.8% 23.8% 20.9% 3.4% 18.4% 18.4% 19.2% 2-yr Avg C$ Growth ACTUALS ESTIMATES Total $C Growth 2.5% 5.0% 10.0% 6.5% 7.0% 7.0% 7.0% 3.5% 8.5% 6.5% 7.5% 8.0% 8.0% 10.0% 4.0% 4.0% 1.0% 9.0% 11.0% 7.5% 8.5% 8.0% 7.0% Americas -2.0% 5.0% 9.0% 8.0% 5.5% 4.0% 5.0% 3.0% 7.5% 2.5% 3.5% 4.5% 2.5% 5.5% 1.0% 0.0% -1.0% 4.0% 5.0% 3.5% 4.2% 4.3% 3.3% Europe, ME & Africa 6.0% 7.5% 11.0% 5.0% 12.0% 11.0% 10.5% 4.5% 13.0% 11.0% 12.0% 10.5% 12.5% 11.5% 7.0% 11.0% 3.9% 13.0% 14.5% 9.0% 12.7% 9.2% 10.5% Asia Pacific 4.5% -0.5% 11.5% 6.5% 1.5% 4.0% 5.0% 2.0% 5.0% 5.5% 6.5% 11.0% 11.0% 15.5% 5.0% -3.0% 0.1% 9.5% 13.5% 12.5% 8.5% 11.8% 7.9% 2

3 THE ESTEE LAUDER COMPANIES (EL, OW, $135PT) SUMMARY Updated 11/2/17 Brand Map Bull Case Best in class organic growth continues Makeup tailwinds continue to support brand growth Lauder/Clinique continue to improve o Lauder connecting with a younger audience o Clinique innovation no longer cannibalizes 3 Step Diversification away from Department Stores accelerating (Ulta) Marketing/innovation noticeably increasing, driving growth Niche brand M&A fills gaps in portfolio & could continue Large inventory/margin opportunity when needed Catalysts Return to +MSD% in Clinique (Lauder has already achieved) Any improvement in US Department Stores or free standing stores Additional brand entries into faster growth channels Further M&A Source: Company documents, RenMac estimates. Thesis Clinique & Lauder improvement will boost organic; MAC is healthier than market thinks; M&A helps growth & competencies; channel diversification is accelerating; & productivity offsets higher cost of growth. F17E Revenue Breakdown A Pac 20% EMEA 39% N&S Am 41% Estimates Frag 13% Color 42% Hair 5% Skin 40% 25% 23% 21% 19% 17% 15% 13% 11% 9% 7% 5% F17E Operating Margin by Segment Americas EMEA APAC Total RenMac vs Consensus $m 1Q18 A 2Q18 E 3Q18 E 4Q18 E 1Q19 E 2Q19 E 3Q19 E 4Q19 E FY18 E FY19 E FY20 E 1Q18 A 2Q18 E 3Q18 E 4Q18 E 1Q19 E 2Q19 E 3Q19 E 4Q19 E FY18 E FY19 E FY20 E Net revenues $3,274 $3,657 $3,066 $3,047 $3,291 $3,811 $3,388 $3,371 $13,043 $13,861 $14, % -0.4% -0.8% -1.7% 0.8% 3.2% 2.5% 1.1% 1.1% 2.3% % organic 14.0% 11.0% 4.0% 4.0% 1.0% 4.0% 11.0% 11.0% 8.0% 7.0% 7.0% Op Profit $602 $735 $534 $354 $626 $796 $619 $408 $2,225 $2,449 $2, % 0.7% 11.9% 9.3% -1.2% 5.5% 15.0% 4.9% 5.3% 7.8% % sales 18.4% 20.1% 17.4% 11.6% 19.0% 20.9% 18.3% 12.1% 17.1% 17.7% 18.4% E.P.S. (u/l) $1.21 $1.38 $1.00 $0.66 $1.28 $1.52 $1.18 $0.78 $4.25 $4.77 $ % -0.8% 14.3% 18.6% -2.1% 3.9% 18.1% 6.2% 6.9% 9.6% Growth Revenue 14.3% 14.0% 7.3% 5.3% 0.5% 4.2% 10.5% 10.6% 10.3% 6.3% 7.3% Op Profit 35.6% 12.4% 9.3% 25.9% 4.0% 8.4% 15.8% 15.3% 19.1% 10.1% 11.6% Margin Ch 289bp -29bp 31bp 190bp 63bp 80bp 84bp 49bp 126bp 61bp 71bp EPS 43.8% 13.3% 9.6% 29.6% 5.6% 10.0% 18.2% 18.7% 22.2% 12.0% 13.6% Bear Case Cost of growth increasing (own retail build outs, M&A) Opening of free standing stores is riskier than core business More volatile than peers given macro sensitivity Integration risk, given 8 acquisitions since late 2014 Core Skin Care category (industry wide) remains weak Margin opportunity has not yet materialized Competition intensifying, incl. fast growth niche brands Guidance F18 Sales: 8 9% C$ sales; 2pts Too Faced & Becca; +2pt Fx Margins: bp, SMI $ m; no flow through of LBF (reinvested) EPS: $3.87 $3.94 (9c Fx, 1c M&A); 9 11% C$ increase Other: Tax 26%; CFO $1.9bn; CapEx 4.5 5% of Sales Dec Q: 10 11% sales (3pts TF & Becca, +3 4pts Fx); $ EPS (+7c Fx) Long Term: Prestige 4 5% growth + 1 2pts of share (1pt M&A); LBF $ m p.a. by 2021; 50bp margin avg next 3 yrs; 150 inventory days by

4 ANALYST(S) CERTIFICATION(S): I, April Scee, herby certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. IMPORTANT DISCLOSURES: Renaissance Macro Research, LLC is part of Renaissance Macro Holdings, LLC and its affiliates. The analysts responsible for preparing this research report received compensation based on various factors, none of which is revenue generated by investment banking activities. Renaissance Macro Research (RenMac) is not engaged in any investment banking activities at this time. Analysts regularly conduct site and company visits to review the operations of the company and discuss financial and strategic plans with management, but RenMac s policies prohibits them from accepting payment or reimbursement for their travel expenses. RenMac produces many types of research including, but not limited to, fundamental research, quantitative research, Washington Policy, Economics and Technical Research. Recommendation in one type of research product may differ from recommendations contained in other types of research products whether as a result of differing time horizons, methodologies, or otherwise. No Analyst Ownership: The analyst principally responsible for the preparation of this research report or a member of the analyst s household does not hold a position in the stocks mentioned in this report. Primary Stock: Estee Lauder (EL, 11/01/2017, US $122.12). Overweight Price target and Valuation Methodology: Each Analyst has a single price target in all of the stocks that they cover. The price target represents that Analyst s expectation of where the stock will trade in the next twelve months. To arrive at our valuation we use a blend of relative value metrics and a DCF. Risk Disclosure(s): Risks include but are not limited to, emerging market issues, currency pressure, raw material increases, heighteed competition (branded, Private label and/or new entrants), more promotional environment, retailer de-stockings, consumer malaise, inability to react to macro or consumer trends, poor capital allocation, and execution. Guide to RenMac s Fundamental Research Rating System: Our fundamental coverage Analysts use a relative ranking system to rate stocks as Buy, Sell or Hold (see definitions below) relative to other companies covered by the Analyst or are deemed to be in the same industry (the Analysts Coverage Universe). In addition to the stock ratings each Analyst provides an Industry Ratings which provides the outlook for the industry coverage as Positive, Neutral or Negative (see definitions below). Investors should carefully read the entire research report including the definitions of all ratings and not infer its content from ratings alone. Stock Ratings: Overweight The stock is expected to outperform the un-weighted expected total return of the industry coverage universe over the next 12 months. Equal Weight The stock is expected to perform in line with the un-weighted expected total return of the industry coverage universe over the next 12 months. Underweight The stock is expected to underperform the un-weighted expected total return of the industry coverage universe over the next 12 months. Ratings Suspended - The ratings and price target have been suspended temporarily due to market events that make coverage impracticable or to comply with applicable regulations and /or firm policy. 4

5 Distribution of Ratings: RenMac has 31 companies under coverage. 45% have been assigned an Overweight Rating. 42% have been assigned an Equalweight Rating. 13% have been assigned an Underweight Rating. None of the companies under coverage are Invetment Banking clients. Industry Rating: Positive Industry coverage universe has improving fundamentals and valuations. Neutral Industry coverage universe has neutral fundamentals and valuations. Negative Industry coverage universe has deteriorating fundamentals and valuations. O: /19/2017 O: /15/2017 O: /12/2017 Estee Lauder Rating History as of 11/01/2017 Powered by: BlueMatrix O: /21/ Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17 Closing Price Price Target Overweight (O); Equalweight (E); Underweight (U); Ratings Suspended (S) DISCLAIMER: This document has been prepared by Renaissance Macro Research, LLC ( RenMac ), an affiliate of Renaissance Macro Securities, LLC. This document is for distribution only as may be permitted by law. It is published solely for information purposes; it is not an advertisement nor is it a solicitation or an offer to buy or sell any financial instruments or to participate in any particular trading strategy. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained in this document. The information is not intended to be a complete statement or summary of the markets, economy or other developments referred to in the document. Any opinions expressed in this document may change without notice. Any statements contained in this report attributed to a third party represent RenMac's interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. Nothing in this document constitutes a representation that any investment strategy or recommendation is suitable or appropriate to an investor s individual circumstances or otherwise constitutes a personal recommendation. Investments involve risks, and investors should exercise prudence and their own judgment in making their investment decisions. The value of any investment may decline due to factors affecting the securities markets generally or particular industries. Past performance is not indicative of future results. Neither RenMac nor any of its directors, employees or agents accept any liability for any loss (including investment loss) or damage arising out of the use of all or any of the information. Any information stated in this document is for information purposes only and does not represent valuations for individual securities or other financial instruments. Different assumptions by RenMac or any other source may yield substantially different results. The analysis contained in this document is based on numerous assumptions and are not all inclusive. 5

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