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Lululemon (LULU) Q3 Earnings: Will the Stock Disappoint?

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Lululemon Athletica Inc. (LULU - Free Report) is slated to report third-quarter fiscal 2016 results on Dec 7. Last quarter, the company’s earnings came in line with the Zacks Consensus Estimate, having outperformed the same marginally by 0.2% in the trailing four quarters. Let’s see how things are shaping up for this announcement.

LULULEMON ATHLT Price and EPS Surprise


Factors Influencing This Quarter

While Lululemon provided an encouraging fiscal 2016 outlook following its last reported results, the company continues to be prone to unfavorable currency movements. Evidently, these woes played spoilsport in the second quarter, and any persistence of adverse currency can weigh on Lululemon’s results. Further, the fading popularity of athleisure wear is likely to take a toll on the company’s performance as denims are back in vogue, with new patterns attracting shoppers.

Though Lululemon has been focused on its strategy of doubling revenue and more than doubling earnings by 2020, the aforementioned hurdles make us apprehensive about this yoga-inspired athletic apparel company’s upcoming results.

Earnings Whispers

Our proven model does not conclusively show that Lululemon is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Lululemon currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 43 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Lululemon currently carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

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:

Express Inc. (EXPR - Free Report) , with an Earnings ESP of + 8.33% and a Zacks Rank #3 (Hold), is slated to release earnings on Dec 1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Kroger Co. (KR - Free Report) , with a Zacks Rank #3 and an Earnings ESP of +9.52%, is scheduled to release earnings on Dec 1.

Pier 1 Imports, Inc. (PIR - Free Report) is expected to report earnings on Dec 21 and currently has an Earnings ESP of +8.33%. The stock carries a Zacks Rank #3.

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