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Ulta Beauty (ULTA) to Post Q4 Earnings: What's in Store?

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Ulta Beauty, Inc. (ULTA - Free Report) is slated to release fourth-quarter fiscal 2018 earnings on Mar 14, after the closing bell.

Apart from the fourth quarter of fiscal 2017, the company outpaced earnings estimates in more than three years. It delivered average four-quarter positive earnings surprise of 2.2%. Further, the company recorded sales beat in 17 out of the trailing 20 quarters.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $3.55, reflecting growth of more than 29% year over year. Estimates have remained unchanged over the past 30 days. The consensus estimate for quarterly sales stands at $2,106 million, up 8.4% from the figure registered in the year-ago period.

Ulta Beauty Inc. Price and EPS Surprise

 

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

Factors Likely to Influence 4Q18

Robust omni-channel efforts — including solid e-commerce and in-store sales growth — have been driving Ulta Beauty’s performance. Further, its loyalty program and exclusive merchandise offerings are other tailwinds. The company is expected to continue witnessing strength in the loyalty program, backed by the addition of brands, maturation of loyalty members, gains from Platinum and Diamond Tiers, and higher penetration of the credit card program. Sales from gift card, credit card and loyalty programs are expected to remain sturdy and boost the top line.

Notably, the company registered e-commerce sales growth of 42.5% in third-quarter fiscal 2018, which reflects about 340 basis points (bps) of the total comparable sales (comps) growth. For fiscal 2018, management anticipates e-commerce sales growth in the 40% range. Additionally, the company’s latest distribution center in Fresno, CA, is ready to serve e-commerce and retail operations. The Fresno center has been serving approximately 173 stores, beside improving its current share to about 21% of e-commerce orders. The company plans to open 100 stores and remodel or relocate 15 outlets in fiscal 2018.

Apart from the aforementioned growth drivers, strength in retail business, higher market share gains and sturdy salon operations are likely to drive Ulta Beauty’s top and bottom lines in the to-be-reported quarter. Management earlier projected net sales of $2,085-$2,103 million for the fiscal fourth quarter, up from $1,937.6 million registered in the prior-year quarter that had a 53rd week. Comps, including e-commerce sales, are predicted to grow 7-8% in the quarter under review. Earnings per share are envisioned to be $3.50-$3.55.

However, Ulta Beauty is grappling with soft operating margins, owing to higher SG&A expenses. This remains a concern for the to-be-reported quarter. Operating margin is anticipated to decline 50-70 bps in fiscal 2018, which might weigh on the company’s profitability.

Zacks Model

Our proven model does not conclusively predict that Ulta Beauty is likely to beat estimates in fourth-quarter fiscal 2018. 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.

Although Ulta Beauty currently carries a Zacks Rank #3, which increases the predictive power of earnings beat, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Bed Bath & Beyond Inc. (BBBY - Free Report) has an Earnings ESP of +1.82% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

PVH Corp. (PVH - Free Report) has an Earnings ESP of +1.14% and a Zacks Rank #2.

The Michaels Companies, Inc. (MIK - Free Report) has an Earnings ESP of +0.70% and a Zacks Rank #3.

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