Beauty Sector Reset for 2026: Which Cosmetics Stocks Could Lead the Rally?

The cosmetics and beauty industry is at a critical inflection point as we enter 2026. While near-term headwinds from softer consumer spending and supply chain pressures continue to weigh on valuations, a handful of well-positioned players are positioned to capitalize on the shift toward digital innovation and premium product offerings. Here’s what investors need to know.

The Market is Repricing Beauty: Why Now?

Beauty stocks have largely lagged the broader market over the past year, with the Zacks Cosmetics industry returning just 10% compared to the S&P 500’s 18.3% gain. The industry currently trades at 28.99X forward P/E—a premium to the Consumer Staples sector (16.42X) but notably above the five-year median of 31.02X. This compression creates both risk and opportunity for the right companies.

The gap between opportunity and challenge is where makeup quotes from industry leaders become instructive: the winners in 2026 won’t be those who simply hold share, but those driving transformation. Let’s examine the four stocks standing out amid this market reset.

The Standout Performers to Watch

The Estee Lauder Companies (EL) remains the crown jewel of prestige beauty. Carrying a Zacks Rank #1 (Strong Buy) designation, the company’s Beauty Reimagined strategy is reshaping operations around consumer-centricity, high-growth markets and digital expansion. The stock has surged 39.7% in the past six months—a clear signal that the market believes in the turnaround narrative. The consensus EPS estimate sits at $2.15 for the current fiscal year, with positive momentum in recent revisions.

Coty (COTY), rated Zacks Rank #3 (Hold), is betting big on its prestige fragrance and skincare portfolio while stabilizing its mass-market consumer beauty division. The company’s “All In to Win” cost-optimization program is delivering tangible margin improvement. However, the stock has declined 34% over six months, making it a potential value play for contrarian investors willing to wait for the turnaround to gain traction. Current EPS consensus stands at $0.42.

Helen of Troy (HELE) operates across multiple segments but is increasingly focused on high-performing leadership brands in beauty and personal care. The Elevate for Growth strategy and Project Pegasus restructuring initiative are designed to strengthen margins and fund brand investments. The stock is down 26% in six months despite solid strategic positioning. Current-year EPS estimate: $4.05.

European Wax Center (EWCZ), the largest franchise operator of out-of-home waxing services in the U.S., represents a different beauty play—one focused on recurring services rather than products. Despite a 33.6% six-month decline and a $0.61 EPS consensus, the company’s franchise model and focus on guest acquisition and retention offer long-term scalability. EWCZ ranks #3 on the Zacks scale.

What’s Actually Driving Change in Beauty?

Three macro trends are reshaping the entire sector:

Digital-First Strategies: e-commerce capabilities, virtual try-ons and data-driven marketing are no longer differentiators—they’re essentials. Every major player is racing to capture share through digital channels.

Innovation and Clean Beauty: Consumer demand for science-backed formulations and organic products continues to outpace traditional offerings. Companies investing in R&D and clean beauty portfolios are positioning for long-term growth.

Cost Pressures Creating Separation: Rising packaging, ingredient and logistics costs are hitting everyone, but companies with scale, operational discipline and pricing power are pulling ahead. The industry’s bottom 27% ranking (Zacks Industry Rank #177 out of 243) reflects this struggle at the margins, while leaders are adapting.

The Valuation Setup

Here’s what’s interesting: the industry consensus EPS estimate for the current fiscal year has dropped 6.1% since early October 2025. That’s bearish on the surface, but it also means expectations are now more realistic. For patient investors, depressed valuations combined with improving execution at top-tier players could set up a compelling risk-reward heading into 2026.

The S&P 500 trades at 23.45X P/E, while the Cosmetics industry at 28.99X commands a premium—but not an unreasonable one given the innovation tailwinds and brand strength of leading players. Whether this premium compresses or expands will depend on which companies successfully execute their digital and operational transformation initiatives.

The Bottom Line

The beauty sector is resetting for 2026. Not all cosmetics stocks are created equal—the gap between strong execution and mediocre management is wider than ever. EL’s momentum is hard to ignore, while COTY, HELE and EWCZ offer potential value for investors who believe in their turnaround strategies. The sector’s 10% return last year may seem lackluster, but the stage is set for a more differentiated performance as 2026 unfolds, with clear winners and losers emerging based on digital adoption, brand strength and operational execution.