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Here's Why Ulta (ULTA) Persists in Investors' Good Books

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Ulta Beauty, Inc. (ULTA - Free Report) has been delivering a sensational performance when compared with the wider industry. The company’s achievements are mainly driven by its effective merchandise innovations, solid marketing initiatives, outstanding e-Commerce improvement and continued progress at the company’s salon operations.

We observed that this Zacks Rank #2 (Buy) stock has outpaced the Zacks categorized Retail-Miscellaneous/Diversified industry in the past one year. In the said time frame, the stock has surged approximately 28% compared with the industry’s decline of 5.9%. We noted that Ulta Beauty’s shares have increased roughly 3.4% since its first-quarter fiscal 2017 earnings release. The company has a long-term earnings growth rate of 19.5% with a VGM Score of “B”, which underlines its inherent strength.

The company posted robust first-quarter fiscal 2017 results, which marked its 14th straight quarter of earnings and sales beat. Results grew year over year, fueled by efficient execution of the company’s growth plans. Notably, Ulta Beauty recorded a 70.9% growth in e-Commerce sales, marking its highest growth since 2014. The company has been able to maintain the right balance between online and physical stores, aiming to garner goodwill in a short span and making itself immune to the Amazon-dominated market. Additionally, traffic remained favorable, which in turn drove comps.        

This superb performance encouraged management to perk up its fiscal 2017 guidance. The company now expects to deliver comps growth (including e-Commerce) in the range of 9–11%, up from the previous projection of 8–10%. Earnings per share growth rate is now envisioned to come in mid-twenties percentage band, compared with low-twenties percentage range guided earlier. Strong results also led the Zacks Consensus Estimate for fiscal 2017 to go up by six cents to $8.12 in the past seven days.

Ulta Beauty’s empire consists of close to 990 stores and driven by the company’s eagerness to expand store base the company plans to open another 100 stores by the end of fiscal 2017. Nevertheless, the company’s expansion strategies are limited within the U.S. and lags behind on the global front as it has no international stores, significantly impacting its brand awareness.

Other Key picks

Investors may also consider stocks such as Best Buy Co., Inc. (BBY - Free Report) , Burlington Stores, Inc. (BURL - Free Report) and Darden Restaurants, Inc. (DRI - Free Report) all carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Best Buy had an average earnings surprise of 33.8% in the trailing four quarters and long term earnings growth rate of 11.4%.

Burlington Stores had an average earnings surprise of 22.6% in the trailing four quarters and long term earnings growth rate of 15.9%.

Darden Restaurants had an average earnings surprise of 3.4% in the trailing four quarters and long term earnings growth rate of 10.9%.

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