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Will Ulta's (ULTA) Positive Earnings Trend Continue in Q3?

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Ulta Beauty, Inc. (ULTA - Free Report) is slated to announce third-quarter fiscal 2017 earnings on Nov 30. In the preceding quarter, it came up with a positive earnings surprise of 2.8%.

In the trailing four quarters, this leading beauty retailer in the United States outperformed the Zacks Consensus Estimate by an average of 4.2%. Let’s see how things are shaping up for this announcement.

What to Expect?

Investors are keen on finding out whether Ulta Beauty will be able to continue positive earnings surprise streak in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is $1.66, reflecting year-over-year growth of 18.6%. We note that the Zacks Consensus Estimate has been stable in the last 30 days. Further, analysts polled by Zacks expect revenues of $1.34 billion, reflecting an increase of 18.6% from the year-ago quarter.

Ulta Beauty Inc. Price and EPS Surprise

Ulta Beauty Inc. Price and EPS Surprise | Ulta Beauty Inc. Quote

Furthermore, we note that the stock has underperformed the industry in the past month. The company’s shares have increased 4.4%, while the industry grew 3.6%.



Factors at Play

Ulta Beauty has a robust surprise history, with earnings and sales beat recorded in 15 straight quarters. In the most recent quarter, results were fueled by market share gains and solid gains from its loyalty program. Further, continued strength in prestige cosmetics, effective marketing initiatives, outstanding e-commerce business and superb salon operations have been growth drivers. Further, the company stands out in an intensely competitive landscape with e-commerce sales growth of 72.3% in the second quarter.

Comps remain positive backed by favorable traffic trends. This along with a robust guidance for fiscal 2017 makes investors optimistic on the stock. The company has also been gaining from constant merchandise innovations, solid marketing initiatives, outstanding e-commerce improvement and continued progress at the salon operations.

Encouraged by the sturdy results, management perked up fiscal 2017 guidance. The company now expects to deliver comps growth (including e-commerce) in the range of 10-11% for fiscal 2017, up from the old projection of 9-11%. Earnings per share growth rate are now envisioned to come in high-twenties percentage band, compared with mid-twenties percentage range guided earlier. Management also stated that it expects ultimate rewards credit card to contribute significantly to the top line in fourth-quarter 2017.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Ulta Beauty is likely to beat estimates this quarter. This is because 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ulta Beauty has an Earnings ESP of -1.21% as the Most Accurate estimate of $1.64 is pegged lower than the Zacks Consensus Estimate of $1.66 per share. While the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Stocks Poised to Beat Earnings Estimates

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:

Zumiez Inc. (ZUMZ - Free Report) currently has an Earnings ESP of +0.69% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Eagle Outfitters Inc. (AEO - Free Report) has an Earnings ESP of +1.04% and a Zacks Rank #2.

The Kroger Company (KR - Free Report) currently has an Earnings ESP of +3.33% and a Zacks Rank #3.

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