Cramer commends Estee Lauder's CEO, advises buying beauty stock despite its poor performance

  • "Mad Money" host Jim Cramer argues that Estee Lauder President and CEO Fabrizio Freda has made his cosmetics company a best-of-breed global leader.
  • Despite the stock's poor performance after earnings, Cramer recommends buying Estee Lauder into weakness on its strong international prospects.

As shares of Estee Lauder Companies slid on Monday amid widespread weakness in the consumer packaged goods stocks, CNBC's Jim Cramer came out in defense of the decades-old beauty giant.

"The truth is Estee Lauder's miles ahead of its peers and the stock deserves to be a lot higher," the "Mad Money" host said. "Bizarrely, this stock's been getting slammed ... as investors didn't like everything they heard on the conference call."

Estee Lauder's third-quarter earnings report beat analysts' top- and bottom-line estimates, with 13 percent sales growth and a 17 percent boost to net income.

The cosmetics maker's sales grew at double the pace of the broader category. Demand for skin-care products from Estee Lauder's La Mer and Clinique brands helped drive the strength.

But the post-earnings conference call sparked some bearish worries among investors. On the call, Estee Lauder President and CEO Fabrizio Freda indicated that growth in the cosmetics space was starting to level off after years of expansion.

The CEO also disclosed that some claims the company made about how long its makeup stays on weren't entirely accurate.

"It's not the end of the world, but the company's about as well-run as it gets, so the idea that there was a group of rogue employees who [were] basically lying to the customers struck a pretty downbeat chord," Cramer said.

Still, Cramer had faith in Freda, who took over as CEO in 2009 after nearly 30 years at Procter & Gamble.

As one of the only high-level consumer goods executives in the United States who is foreign-born, Freda had the foresight to make his makeup brand global, not anchored in U.S. department stores like the rest of the industry had been for years, Cramer argued.

But "Freda didn't just foresee that foreign markets, particularly in Asia, would be critical here," the "Mad Money" host continued. "He also understood that social media would drive sales."

These days, Freda spends much of his time in Asia connecting with social media influencers to find out what kinds of products they want.

Freda has also been building on Estee Lauder's duty-free business, recognizing that airports and tax-free zones were ideal places for capturing customers from the emerging wealthy classes in South Korea, China, Brazil and the Middle East, Cramer said.

"I think Estee Lauder is riding a wave of selfie-propelled good fortune here," Cramer concluded. "That's why, when its stock's getting clobbered after Freda told us that cosmetics growth was ... leveling off, I think it was necessary to circle back to you right now and recommend this stock into weakness. Estee Lauder's an innovator and a share-taker that's become the best-of-breed by far in its category and I would be a buyer, not a seller."

WATCH: Cramer defends the stock of beauty giant Estee Lauder

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