Lululemon Athletica Inc. LULU is slated to report third-quarter fiscal 2015 results on Dec 9. In the last quarter, the company’s earnings came in line with the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
Though Lululemon posted solid second-quarter fiscal 2015 results, the company’s margins were impacted by greater airfreight expenses incurred to counter port delays at the West Coast, weakening of Australian and Canadian currencies, occupancy deleverage, and higher markdowns.
The company expects higher airfreight costs, occupancy and depreciation deleverage, and adverse currency translations to remain headwinds in the third quarter of fiscal 2015. Moreover, the company’s earnings outlook for the third quarter is below expectations. This makes us slightly cautious about the upcoming results.
Nevertheless, the company remains optimistic about the holiday season and thus, it raised its sales and earnings guidance for fiscal 2015. Also, the company sees immense potential in its initiatives that include investing in innovations, product introductions and enhancing customer experience.
Earnings Whispers
Our proven model does not conclusively show that Lululemon is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Lululemon is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate both are at 37 cents.
Zacks Rank: Lululemon currently has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
CarMax Inc. KMX has an Earnings ESP of +1.45% and a Zacks Rank #2 (Buy).
Constellation Brands Inc. STZ has an Earnings ESP of +1.55% and a Zacks Rank #2.
AutoZone Inc. AZO has an Earnings ESP of +0.73% and a Zacks Rank #3 (Hold).
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