Updated from 12:26 p.m. EDT.Continuing the trend of cosmetic companies surprising investors with robust earnings, Estee Lauder ( EL) posted a better-than-expected profit in the third quarter, buoyed by strong sales in Asia. The news sent the company's shares soaring more than 18% in afternoon trading to close at $36.88. The maker of Clinique and M.A.C. cosmetics, the company said its earnings reached $27.2 million, or 14 cents a share, compared with $90.1 million, or 46 cents, a year earlier. Excluding restructuring and other charges, earnings were 16 cents a share, far surpassing analysts' expected earnings of 5 cents. Sales fell 10% to $1.70 billion, hurt by the strength of the U.S. dollar. A decline in passenger traffic through Estee Lauder's airport stores also cut away at its travel retail business, especially in Europe, the Middle East and Africa. The company's fragrance line was especially hard hit across all regions, as consumers stayed away from designer fragrances. Skin care sales have been the most steady, as consumers view these products more as necessities then discretionary purchases. This sentiment bodes well for Avon Products ( AVP), which tends to be a trade-down brand, sending shares up 7% to close at $25.22. The company reports earnings later in the week. Estee Lauder is in the midst of a company overhaul under new CEO Fabrizio Freda. The company plans to cut jobs, freeze merit raises and maintain its hiring freeze under its four-year restructuring. Freda became president and CEO during the third quarter.
Looking ahead, the company remains cautious and says it expects business to remain challenging for the next 12 months. Last week, rivals Revlon ( REV) and Bare Escentuals ( BARE) also beat expectations. Revlon reported a profit of $12.7 million, or 25 cents a share, compared with a net loss of $2.5 million, or 5 cents, in the year-ago quarter, while Bare Escentuals beat analysts' expectations by 4 cents.