Lululemon's Earnings: What to Expect and Should You Invest?

The upcoming earnings report from Lululemon (LULU) is highly anticipated, as the market is expecting a year-over-year increase in earnings alongside higher revenues for the quarter ending in October 2024. This outlook reflects how the company is performing and can significantly influence its stock price.

Analysts believe the stock could rise if it surpasses key earnings and revenue estimates in the earnings report, which is set to be released on December 5. Conversely, if the company fails to meet these predictions, the stock may see a decline.

The reactions to the earnings report will largely depend on what the management discloses regarding business conditions during the earnings call. Therefore, insights into the likelihood of a positive surprise in earnings per share (EPS) can provide value to investors.

Consensus Estimates

According to market expectations, Lululemon is projected to report quarterly earnings of $2.69 per share, marking an increase of 6.3% compared to the prior year. Furthermore, revenues are anticipated to reach $2.35 billion, reflecting a 6.8% rise from the same quarter last year.

Trends in Estimate Revisions

It's important to note that the consensus EPS estimate has been slightly adjusted downward by 0.43% over the last 30 days. This adjustment indicates how analysts have been re-evaluating their forecasts based on more recent data. However, this collective change does not always mean that all analysts are moving in the same direction.

Understanding Earnings Whisper

Prior estimate revisions can also shed light on the business environment for the quarter in question. The Zacks Earnings ESP (Expected Surprise Prediction) aims to gauge potential earnings surprises by comparing the Most Accurate Estimate to the Zacks Consensus Estimate. The Most Accurate Estimate represents the latest revisions and is considered to be more accurate than initial estimates.

A positive Earnings ESP suggests a potential earnings beat, especially when coupled with a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold). Research shows that this combination can result in a positive surprise nearly 70% of the time. Conversely, a negative Earnings ESP does not automatically signal an earnings miss, but predicting positive results becomes more difficult in such cases.

Current Numbers for Lululemon

For Lululemon, the Most Accurate Estimate stands higher than the Zacks Consensus Estimate, signaling that analysts have grown more optimistic regarding the company's earnings potential. This results in an Earnings ESP of +0.45%. Presently, the stock holds a Zacks Rank of #3.

This combination suggests a favorable chance that Lululemon will outperform the consensus EPS estimate.

Examining Earnings Surprise History

Historical earnings performance can provide additional context for future expectations. In the previous quarter, Lululemon was expected to earn $2.92 per share but surprised the market with earnings of $3.15, a difference of +7.88%. Over the past four quarters, the company has achieved an earnings beat each time.

Final Thoughts

While the possibility of an earnings beat or miss can significantly impact a stock's movement, various other factors can also play a role. Despite beating expectations, stocks may still decline due to disappointing guidance or other issues. Conversely, unforeseen positive factors can lead to gains even when a stock misses its targets.

Therefore, investing in companies with expected earnings beats can increase the odds of a successful investment. For investors considering Lululemon, it may be beneficial to monitor the Earnings ESP and Zacks Rank prior to its quarterly release to make more informed decisions.

Comparative Industry Insights

Another player in the apparel industry, PVH (PVH), is projected to earn $2.61 for the quarter ending in October 2024, reflecting a decline of 10% year-over-year. Revenue projections for PVH are approximately $2.22 billion, down 5.9% compared to the previous year. The consensus EPS estimate for PVH has undergone a slight upward revision of 0.3%. However, a decline in the Most Accurate Estimate has resulted in a negative Earnings ESP of -1.46%. Given its Zacks Rank of #3, predicting a beat for PVH remains uncertain despite its previous success in exceeding estimates.

Stay informed about upcoming earnings announcements and market movements through various resources.

Lululemon, Earnings, Investing