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Lululemon (LULU) Q2 Earnings: What to Watch

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Shares of Lululemon (LULU - Free Report) were nearly flat during regular trading Wednesday just one day before the yoga apparel firm is set to release its second-quarter financial results. LULU’s earnings come right on the heels of Dick’s Sporting Goods’ (DKS - Free Report) dismal quarterly performance. So let’s see what investors should expect from Lululemon when it reports after the bell Thursday.

Lululemon has seen its stock price skyrocket over 140% during the last 12 months on the back of strong growth and the continued expansion of the overall athleisure market. But the Canadian company faces more competition from giants like Nike (NKE - Free Report) and Adidas (ADDYY - Free Report) , as well as Gap’s (GPS - Free Report) Athleta and other more up-and-coming athleisure and yoga brands.


Our current Zacks Consensus Estimate is calling for Lululemon’s second-quarter revenues to climb by 15.2% to hit $669.14 million. Meanwhile, LULU’s adjusted quarterly earnings are expected to expand by 25.6% to hit $0.49 per share. Yet, we still need to know what chance Lululemon has to surpass our quarterly earnings estimate.

Luckily, we can turn to our exclusive Earnings ESP figure to help us find out. Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Lululemon currently sports an earnings ESP of 1.53% and a Zacks Rank #3 (Hold). Therefore, our model suggests that the yoga apparel company could top our quarterly earnings estimates when it reports its Q2 earnings results after the closing bell Thursday. Plus, Lululemon has topped our earnings estimates in the trailing five quarters.

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