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Will lululemon (LULU) Post Positive Earnings Again in Q4?

Zacks Equity Research
Updated

lululemon athletica inc. LULU is slated to report fourth-quarter fiscal 2017 results on Mar 27. The question lingering in investors’ minds is whether this yoga-inspired athletic apparel retailer will be able to deliver another positive earnings surprise in the to-be-reported quarter.

The company pulled off a positive earnings surprise of 7.7% in the previous quarter. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 8.1%. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The Zacks Consensus Estimate for the quarter under review is pegged at $1.27, reflecting year-over-year growth of 27%. However, estimates were stable in the last 30 days. Further, analysts polled by Zacks expect revenues of $910.2 million, up about 15.2% from the year-ago quarter.

lululemon athletica Inc. Price, Consensus and EPS Surprise

lululemon athletica inc. Price, Consensus and EPS Surprise | lululemon athletica inc. Quote

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Moreover, lululemon’s share price has increased 37% in the last six months compared with the industry’s growth of 14.3%.



Factors in Play

lululemon is gaining from the smooth execution of its 2020 strategy, focus on e-commerce business and ivivva remodeling. Also, these initiatives led the company to deliver impressive earnings and sales surprises. Notably, the company delivered positive earnings surprise in the last three quarters, alongside reporting eight straight sales beats.

To achieve targets under its 2020 strategy, the company outlined four distinct growth strategies, including product innovation, building store fleet in North America, expanding digital business and international expansion.

Furthermore, lululemon remains keen on expanding store base overseas and expects its international business, including e-commerce, to account for nearly 20-25% of the total sales by 2020. Thus, it is well-positioned for persistent growth and improved profitability over the next five years.

Moreover, lululemon’s commitment toward enhancing the e-commerce retailing channel, investing in the innovation of new product categories and bringing improvements to its website, bodes well. The company anticipates process improvements to aid double-digit growth for digital business in the fourth quarter, and into 2018 and beyond. It also remains on track to deliver $4 billion in revenues by 2020.

Additionally, lululemon emerged strongly this past holiday season, driven by accelerating trends across all parts of its businesses. Further, the company anticipates business strength and current trends to sustain throughout 2018 and beyond. Consequently, the company raised its fiscal fourth-quarter guidance.

The company envisions net revenues in the range of $905-$915 million for the fourth quarter. Earnings are anticipated in a band of $1.24-$1.26 per share while adjusted earnings per share (excluding effects of restructuring ivivva operations) are expected to be $1.25-$1.27.

What the Zacks Model Unveils

Our proven model shows that lululemon is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Earnings ESP of +1.30% and the company’s Zacks Rank #3 make us reasonably confident of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks with Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Guess? Inc. GES has an Earnings ESP of +2.19% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Restoration Hardware Holdings Inc. RH has an Earnings ESP of +2.30% and Zacks Rank #2.

Darden Restaurants Inc. DRI has an Earnings ESP of +0.76% and Zacks Rank #2.

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lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
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Guess?, Inc. (GES) : Free Stock Analysis Report
 
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