Lululemon Athletica, Inc. (LULU) recently rebounded from a key trend line to move back within striking distance of its 52-week high. With a Q1 earnings surprise of 16% and bullish growth projection, this Zacks #1 rank stock isn’t stretched thin for momentum.
Company Description
Lululemon Athletica, Inc. designs, manufactures and sells athletic apparel for men and woman in the United States, Australia and Canada. The company sells its products through its own 134 stores, online and through third-party distributors. Lululemon has a market cap of $6.6 billion and was founded in 1998.
LULU has been one of the top momentum stocks of the last year, more than tripling in price after recently breaking above $100. That trend has been supported by impressive sales and earnings growth, last on display with the company’s strong Q1 results from early June that came in ahead of expectations.
First-Quarter Results
Revenue for the period was up 35% from last year to $186 million. Earnings also looked good, coming in at 44 cents, 16% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 24% over the last four quarters.
LULU was hitting hard on multiple fronts during the quarter, with same-store sales up 16% from last year and direct-to-consumer sales up 51% to $14 million.
Gross profit was also on the upswing, climbing to 59% of from 54% last year.
Financial Profile
LULU has been able to use its earnings momentum to maintain a strong balance sheet, with cash and short-term investments up $87 million from last year to $261 million against no long-term debt.
Estimates
With the company raising guidance, we saw some decent movement in estimates, with the current year adding 6% to $2.16. The next-year estimate is pegged at $2.70, a bullish 25% growth projection.
Valuation
In light of recent gains, LULU does look a bit pricey, trading with a forward P/E of 42X, a steep premium to its peer average of 21X.
12-Month Chart
On the chart, shares recently rebounded from a key trend line after hitting a new 52-week high in late April. The stochastic below the chart is signaling that shares are trading safely away from overbought territory. Take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Momentum Trader Service.
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