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Lululemon (LULU) Stock Looks Like a Buy Ahead of Q3 Earnings

Zacks

Shares of Lululemon LULU popped over 2% Friday morning just a few trading days ahead of the release of the yoga and athleisure giant’s third-quarter financial results, which are due out Wednesday. Lululemon’s Q3 outlook appears strong and its stock price currently sits well below its 52-week high.

Overview

Lululemon helped jump-start the current athleisure trend that the likes of Gap GPS and others have followed. The company is coming off a strong second quarter that saw its revenues surge 25% and its adjusted quarterly earnings skyrocket 97%. Plus, the Vancouver, Canada-based firm’s comparable store sales jumped 10% and direct-to-consumer revenue soared 48%.

The yoga power has also performed well amid increased competition from industry giants Nike NKE and Adidas ADDYY, while the likes of Puma and Outdoor Voices have also made inroads. Meanwhile, Under Armour UAA, which has seen its stock price surge over the last year, has found it more difficult to break into athleisure.

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Price

Shares of Lululemon have skyrocketed over 97% in the last 12 months, which blows away its industry’s roughly 16% climb and the S&P 500’s 3.5% gain. In fact, Lululemon has crushed everyone from Macy’s M to Amazon AMZN in the past 52 weeks.

Lululemon stock jumped roughly 2% through late-morning trading Friday to reach $132.15 per share. This represented a 20% downturn from its 52-week and all-time high of $164.79 per share, which sets up what could prove to be a solid buying opportunity for investors high on LULU.

The chart helps investors put LULU’s growth over the last 10 year into perspective.

 

Outlook & Earnings Trends

Looking ahead to Wednesday, Lululemon’s Q3 revenues are projected surge 18.5% to reach $733.49 million, based on our current Zacks Consensus Estimate. Meanwhile, the firm’s full-year revenues are expected to climb 21.8% to reach $3.23 billion.

At the bottom end of the income statement, LULU’s adjusted quarterly earnings are expected to pop 23.2% to reach $0.69 per share. More impressively, Lululemon’s full-year EPS figure is projected to touch $3.58 per share, which would mark over a 38% climb from fiscal 2017.

Investors should also note that Lululemon has seen a good amount of upward earnings estimate revisions recently. This helps us see that at least some analysts are more positive about LULU’s bottom-line growth than they were even after the company reported strong Q2 results.

 

Bottom Line

Lululemon is currently a Zacks Rank #2 (Buy), based, in large part, on its recent positive earnings estimate revision activity. The company also sports an “A” grade for Growth in our Style Scores system.

It is also worth noting that Lululemon’s management plans to expand its men’s category to $1 billion by 2020 as it tries to hit an overall revenue goal of $4 billion. Therefore, LULU stock seems like it might be worth buying based on both its Q3 and long-term outlook, especially at its current price point.

Lululemon is scheduled to release its Q3 financial results after the market closes on Wednesday, December 5.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
The Gap, Inc. (GPS) : Free Stock Analysis Report
 
Macy's, Inc. (M) : Free Stock Analysis Report
 
NIKE, Inc. (NKE) : Free Stock Analysis Report
 
Adidas AG (ADDYY) : Free Stock Analysis Report
 
Under Armour, Inc. (UAA) : Free Stock Analysis Report
 
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