Lululemon (LULU) Earnings Expected to Grow: Should You Buy?

The upcoming earnings report for Lululemon (LULU - Free Report) is generating significant interest in the market. Analysts expect the company to show a year-over-year increase in earnings alongside higher revenues for the quarter that ended in October 2024. This anticipation is crucial when assessing the company's financial outlook, and it could play a vital role in influencing Lululemon's stock price in the near term.

The actual results, set to be announced on December 5, will determine how the stock reacts. If Lululemon's key financial metrics exceed expectations, the stock could see an upward movement. Conversely, if the results fall short, there might be a decline in the stock price.

Management will mainly influence future stock movements and earnings forecasts through their commentary on business conditions during the earnings call. Therefore, understanding the likelihood of a positive earnings per share (EPS) surprise is crucial.

Zacks Consensus Estimate

Lululemon is projected to report quarterly earnings of $2.69 per share, indicating a +6.3% increase compared to last year. The expected revenue for the quarter stands at $2.35 billion, which reflects a growth of 6.8% from the same period a year ago.

Estimate Revisions Trend

In the last 30 days, the consensus EPS estimate has been adjusted downwards by 0.43%. This change reflects how covering analysts have recently reevaluated their initial forecasts. It is important to remember that an overall change in estimates may not showcase the precise direction of each individual analyst's revision.

Earnings Whisper

Recent estimate revisions before the report provide insights into the business conditions that impacted this quarter. This information is integral to the Zacks Earnings ESP (Expected Surprise Prediction) model.

The Zacks Earnings ESP evaluates the Most Accurate Estimate against the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a newer version of the consensus number. Analysts adjusting their estimates close to an earnings release may have access to more recent data, potentially leading to a more accurate projection.

As such, a positive or negative Earnings ESP reading can indicate how the actual earnings might deviate from the consensus estimate. However, the model is particularly effective for predicting positive surprises.

A positive Earnings ESP significantly forecasts an upcoming earnings beat, especially if combined with a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold). Historical data shows that stocks with this combination achieve a positive surprise about 70% of the time. Conversely, a negative Earnings ESP reading does not automatically signify an earnings miss, as predicting positives in such cases has proven unreliable.

How Have the Numbers Shaped Up for Lululemon?

For Lululemon, the Most Accurate Estimate is above the Zacks Consensus Estimate, indicating that analysts have grown more optimistic about its earnings outlook. Currently, the Earnings ESP stands at +0.45%, and with a Zacks Rank of #3, this suggests a solid chance for Lululemon to exceed the consensus EPS estimate.

Does Earnings Surprise History Hold Any Clue?

When analysts project future earnings, they often examine how well a company has matched previous consensus estimates. Lululemon's earnings surprise history is encouraging, having surpassed EPS expectations in each of the last four quarters. For the most recently reported quarter, Lululemon was expected to earn $2.92 per share but reported $3.15, resulting in a surprise of +7.88%.

Bottom Line

While an earnings beat or miss can affect stock prices, they are not the sole determinants. Stocks often experience declines despite beating earnings due to other disappointing factors, and some stocks can rise even with disappointing earnings if there are positive catalysts. Nonetheless, targeting stocks anticipated to exceed earnings expectations can bolster investment success. Hence, reviewing Earnings ESP and Zacks Rank before earnings announcements is prudent. Utilize the Earnings ESP Filter to discover the optimal stocks to buy or sell before they report.

In conclusion, Lululemon appears positioned to deliver an earnings beat, but investors should consider other factors before making investment decisions.

An Industry Player's Expected Results

Another company in the textile and apparel sector, PVH (PVH - Free Report), is estimated to report quarterly earnings of $2.61, which indicates a year-over-year decrease of 10%. Its expected revenue of $2.22 billion reflects a 5.9% decline from the previous year. While PVH's consensus EPS estimate has been adjusted up by 0.3% over the last month, a lower Most Accurate Estimate results in an Earnings ESP of -1.46%. This, combined with a Zacks Rank of #3, makes it challenging to tell if PVH will beat the consensus EPS forecast. PVH has exceeded consensus EPS estimates for four consecutive quarters.

Stay informed about upcoming earnings announcements with the earnings calendar.

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