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Lululemon Q2 Preview: Can Shares Break Downtrend?

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The Zacks Consumer Discretionary Sector has sailed through rough waters in 2022, down more than 30% as consumers cut spending on non-essential items.

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Image Source: Zacks Investment Research

A mega-popular stock in the sector, lululemon athletica (LULU - Free Report) , is scheduled to unveil Q2 earnings on Thursday, September 1st, after the market close.

Founded in 1998, lululemon designs, manufactures, and distributes athletic apparel and accessories for women, men, and female youth.

Currently, the company carries a Zacks Rank #3 (Hold) with an overall VGM Score of a C. How does everything stack up for the apparel giant heading into the print? Let’s find out.

Share Performance & Valuation

LULU shares have tumbled in 2022, losing nearly a fourth of their value and widely underperforming the S&P 500.

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Image Source: Zacks Investment Research

Over the last month, shares have continued their downwards trajectory, declining 4% in value and lagging behind the general market in this timeframe as well.

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Image Source: Zacks Investment Research

LULU’s 32.5X forward earnings multiple is undoubtedly pricey, representing a 58% premium relative to its Zacks Consumer Discretionary Sector. Still, the value is well beneath its five-year median of 40.5X.

The company carries a Style Score of a D for Value.

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Image Source: Zacks Investment Research

Quarterly Estimates

Analysts have had mixed reactions to the quarter to be reported, with a single negative and positive estimate revision hitting the tape. Still, the Zacks Consensus EPS Estimate of $1.85 pencils in a rock-solid 12% Y/Y uptick in quarterly earnings.

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Image Source: Zacks Investment Research

The company’s top-line is in stellar shape as well – lululemon is forecasted to have generated $1.8 billion in quarterly revenue, penciling in year-over-year top-line growth of a steep 22%.

Quarterly Performance & Market Reactions

Lululemon has repeatedly surpassed bottom-line expectations, exceeding the Zacks Consensus EPS Estimate in eight consecutive quarters. Just in its latest print, LULU penciled in a 3.5% bottom-line beat.

Top-line results have also been consistently above expectations, with lululemon recording eight top-line beats over its last ten quarters. Below is a chart illustrating the company’s revenue on a quarterly basis.

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Image Source: Zacks Investment Research

In addition, day-traders who prefer the long side should be aware that LULU shares have moved upwards following four of the company’s previous five quarterly reports, all by at least 2.7%.

Putting Everything Together

Lululemon shares have lagged the general market year-to-date and over the last month, indicating that sellers have remained in control.

LULU shares trade at pricey valuation multiples, further displayed by its Style Score of a D for Value.

Analysts have had differing opinions on their earnings outlook, but estimates still reflect solid year-over-year growth in revenue and earnings.

Further, the company has consistently exceeded quarterly estimates, and the market has had favorable reactions following the majority of recent prints.

Heading into the release, lululemon (LULU - Free Report) carries a Zacks Rank #3 (Hold) with an Earnings ESP Score of -0.7%.


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