Here's How Ulta Beauty (ULTA) Looks Just Ahead Of Q4 Earnings

By Zacks Investment ResearchStock MarketsMar 09, 2020 07:13AM ET

www.investing.com/analysis/heres-how-ulta-beauty-ulta-looks-just-ahead-of-q4-earnings-200514433

Here's How Ulta Beauty (ULTA) Looks Just Ahead Of Q4 Earnings

By Zacks Investment Research | Mar 09, 2020 07:13AM ET

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Ulta Beauty, Inc. (NASDAQ:ULTA) is slated to release fourth-quarter fiscal 2019 results on Mar 12. The beauty retailer delivered a positive earnings surprise of 5.6% in the last reported quarter. Moreover, the company’s earnings outperformed the Zacks Consensus Estimate by 1.7%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fourth-quarter earnings has remained stable over the past 30 days at $3.71 per share. This suggests an increase of 2.8% from the year-ago period’s reported figure. Further, the consensus mark for revenues is pegged at $2,288 million, indicating a rise of 7.7% from the figure reported in the year-ago quarter.

Key Factors to Note

The company has been benefiting from efforts to enhance beauty product offerings and improve store traffic. In sync with this, the company’s focus on innovation and brand launches bode well. During the third quarter, Ulta Beauty expanded its distribution network for iconic brands like benefit, Clinique, Lancome, MAC and Estee Lauder (NYSE:EL) to additional stores and launched products under these banners. These brands are likely to have aided results in fiscal 2019. Additionally, Ulta Beauty’s loyalty program has been a key driver. The company’s excellent marketing and merchandising endeavors have helped the conversion of new guests to members of the program. Moreover, sales through gift cards have been robust, while the credit card program has also been progressing well.

Ulta Beauty Inc. Price and EPS Surprise

Ulta Beauty Inc. Price and EPS Surprise

Ulta Beauty Inc. price-eps-surprise | Ulta Beauty Inc. Quote

Further, Ulta Beauty has been focused on strengthening its omnichannel presence. In this respect, its store-to-door strategy has been yielding results. It has also been seeing growth in the usage of buy online and pick up in store facility. Moreover, the company has been enhancing mobile application capabilities. During the fiscal third quarter, Ulta Beauty expanded its mobile pilot point-of-sale to stores with increased volumes. This is likely to have helped the company enhance customer experience during the holiday season.

However, the U.S. beauty market has been witnessing a soft makeup sales trend due to the absence of innovation in this category. This trend continued through 2019 and saw a further slowdown during the third quarter of fiscal 2019. This cyclical trend is likely to have persisted in the quarter under review. Apart from this, Ulta Beauty has been battling rising selling, general and administrative (SG&A) expenses for a while. The company’s expenses are usually incurred from increasing store labor, growth initiatives and innovation. Further, the company has been making investments in digital channels, salon services, infrastructure and personalization efforts. In the last earnings call, management guided for operating margin deleverage of 60-70 bps for fiscal 2019.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Ulta Beauty this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Ulta Beauty carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks With Favorable Combinations

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:

DICK'S Sporting Goods (NYSE:DKS) has an Earnings ESP of +5.16% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darden Restaurants (NYSE:DRI) has an Earnings ESP of +1.03% and a Zacks Rank #3.

RH (NYSE:RH) has an Earnings ESP of +1.61% and a Zacks Rank #3.

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Ulta Beauty Inc. (ULTA): Free Stock Analysis Report

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Here's How Ulta Beauty (ULTA) Looks Just Ahead Of Q4 Earnings

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