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Forget Under Armour (UAA), Lululemon (LULU) Stock Looks Like a Strong Buy
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Shares of Under Armour (UAA - Free Report) skyrocketed roughly 25% Tuesday on the back of Q3 earnings results that encouraged investors. Fellow athletic apparel firms Nike (NKE - Free Report) and Lululemon (LULU - Free Report) jumped along with UAA. Yet, for investors who might have already missed out on Under Armour’s massive one-day gains, it could be worth considering Lululemon stock instead as the yoga giant looks like a strong buy right now.
Quick Under Armour Overview
Under Armour revenue climbed just 2% to $1.4 billion and its key North American sales slipped 2% to $1.1 billion. These are hardly inspiring top line figures. Instead, investors were excited to see UAA post adjusted quarterly earnings of $0.25 per share, which crushed the Zacks Consensus Estimate of $0.12 per share.
On top of Under Armour’s solid bottom-line beat, the company’s international business jumped 15% to $351 million. Still, UAA’s decline in what is by far its most important market, coupled with generally slow revenue growth, might leave some wanting more.
Lululemon Overview
Lululemon posted its second quarter financial results at the end of August and is expected to release its Q3 metrics in early December. The Vancouver, Canada-based firm reported quarterly revenues that jumped 25% from $581 million to reach $723.5 million.
Meanwhile, Lululemon's adjusted quarterly earnings skyrocketed over 97% from $0.36 per share to $0.71 per share, which crushed our Zacks Consensus Estimate of $0.49. LULU’s comparable store sales jumped 10%, while direct-to-consumer revenue soared 48%—excluding the impact of a Q2 2017 online warehouse sale, this vital category surged 66%.
Overall Q2 e-commerce revenues reach $167.4 million to account for 23.1% of total quarterly revenue. This marked a solid jump from the year-ago period’s 19.5%. On top of Lululemon’s strength, the athleisure industry as a whole is projected to remain strong. “The athleisure movement and influence on fashion continues to be a primary driver of growth opportunity for the apparel industry,” NPD’s chief industry advisor-retail, Marshal Cohen, said in a company statement.
Nike, Adidas (ADDYY - Free Report) , Gap (GPS - Free Report) , and others are all competing for athleisure consumers. With that said, Lululemon has established itself as a yoga and athleisure giant with a loyal and growing following.
Price & Valuation
We can see that LULU stock has crushed Nike and Under Armour over the last three years. The yoga power is also trading at 33.5X forward 12-month Zacks Consensus EPS estimates. This marks a discount compared to Lululemon’s 12-month high of 44.3X and comes in well below UAA’s 56.9X. It is also worth noting that LULU stock closed regular trading Monday at $135.88 per share, down roughly 21% from its 52-week high of $164.79 per share.
Outlook
Looking ahead, our current Zacks Consensus Estimate is calling for Lululemon’s Q3 revenues to pop 18.44% to touch $733.17 million. Meanwhile, the company’s fiscal 2018 revenues are projected to hit $3.23 billion, which would represent a 21.8% climb from 2017.
Moving on, LULU’s adjusted quarterly earnings are expected to expand by 21.43% to reach $0.68 per share. Plus, Lululemon’s full-year EPS figure is projected to soar by over 38%.
Investors should also know that Lululemon has received a ton of upward earnings estimate revisions over the past 60 days, against zero downward changes. The company has earned positive revisions for Q3, Q4, and fiscal 2018 and 2019 over this stretch, which helps to show that at least some analysts are more positive about LULU’s future.
Bottom Line
Lululemon’s recent positive earnings estimate revision activity helps the company earn a Zacks Rank #1 (Strong Buy). The company also rocks an “A” grade for Growth in our Style Scores system.
Lululemon’s management also 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, it seems like LULU stock might be a solid retail and or consumer discretionary stock to own right now, especially ahead of the holiday shopping season.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Forget Under Armour (UAA), Lululemon (LULU) Stock Looks Like a Strong Buy
Shares of Under Armour (UAA - Free Report) skyrocketed roughly 25% Tuesday on the back of Q3 earnings results that encouraged investors. Fellow athletic apparel firms Nike (NKE - Free Report) and Lululemon (LULU - Free Report) jumped along with UAA. Yet, for investors who might have already missed out on Under Armour’s massive one-day gains, it could be worth considering Lululemon stock instead as the yoga giant looks like a strong buy right now.
Quick Under Armour Overview
Under Armour revenue climbed just 2% to $1.4 billion and its key North American sales slipped 2% to $1.1 billion. These are hardly inspiring top line figures. Instead, investors were excited to see UAA post adjusted quarterly earnings of $0.25 per share, which crushed the Zacks Consensus Estimate of $0.12 per share.
On top of Under Armour’s solid bottom-line beat, the company’s international business jumped 15% to $351 million. Still, UAA’s decline in what is by far its most important market, coupled with generally slow revenue growth, might leave some wanting more.
Lululemon Overview
Lululemon posted its second quarter financial results at the end of August and is expected to release its Q3 metrics in early December. The Vancouver, Canada-based firm reported quarterly revenues that jumped 25% from $581 million to reach $723.5 million.
Meanwhile, Lululemon's adjusted quarterly earnings skyrocketed over 97% from $0.36 per share to $0.71 per share, which crushed our Zacks Consensus Estimate of $0.49. LULU’s comparable store sales jumped 10%, while direct-to-consumer revenue soared 48%—excluding the impact of a Q2 2017 online warehouse sale, this vital category surged 66%.
Overall Q2 e-commerce revenues reach $167.4 million to account for 23.1% of total quarterly revenue. This marked a solid jump from the year-ago period’s 19.5%. On top of Lululemon’s strength, the athleisure industry as a whole is projected to remain strong. “The athleisure movement and influence on fashion continues to be a primary driver of growth opportunity for the apparel industry,” NPD’s chief industry advisor-retail, Marshal Cohen, said in a company statement.
Nike, Adidas (ADDYY - Free Report) , Gap (GPS - Free Report) , and others are all competing for athleisure consumers. With that said, Lululemon has established itself as a yoga and athleisure giant with a loyal and growing following.
Price & Valuation
We can see that LULU stock has crushed Nike and Under Armour over the last three years. The yoga power is also trading at 33.5X forward 12-month Zacks Consensus EPS estimates. This marks a discount compared to Lululemon’s 12-month high of 44.3X and comes in well below UAA’s 56.9X. It is also worth noting that LULU stock closed regular trading Monday at $135.88 per share, down roughly 21% from its 52-week high of $164.79 per share.
Outlook
Looking ahead, our current Zacks Consensus Estimate is calling for Lululemon’s Q3 revenues to pop 18.44% to touch $733.17 million. Meanwhile, the company’s fiscal 2018 revenues are projected to hit $3.23 billion, which would represent a 21.8% climb from 2017.
Moving on, LULU’s adjusted quarterly earnings are expected to expand by 21.43% to reach $0.68 per share. Plus, Lululemon’s full-year EPS figure is projected to soar by over 38%.
Investors should also know that Lululemon has received a ton of upward earnings estimate revisions over the past 60 days, against zero downward changes. The company has earned positive revisions for Q3, Q4, and fiscal 2018 and 2019 over this stretch, which helps to show that at least some analysts are more positive about LULU’s future.
Bottom Line
Lululemon’s recent positive earnings estimate revision activity helps the company earn a Zacks Rank #1 (Strong Buy). The company also rocks an “A” grade for Growth in our Style Scores system.
Lululemon’s management also 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, it seems like LULU stock might be a solid retail and or consumer discretionary stock to own right now, especially ahead of the holiday shopping season.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>