Lululemon Athletica Inc. LULU is slated to report fourth-quarter fiscal 2015 results on Mar 30. In the last quarter, the company posted a negative earnings surprise of 5.4%. Let’s see how things are shaping up for this announcement.
Factors Influencing this Quarter
Lululemon remains focused on undertaking investments in innovations, product introductions and enhancement of customer experience to drive growth, and strengthen its position. The company is also encouraged by the progress of its global expansion plans and remains optimistic about its brand-building initiatives, worldwide.
However, in its third-quarter earnings release, management stated that the company began the fourth quarter on a mixed note due to slow consumer traffic, partly compensated by an improvement witnessed during Thanksgiving. Given the soft performance in the third quarter, a tough macroeconomic scenario and ongoing currency headwinds, management provided a conservative outlook for the fourth quarter and fiscal 2015.
Lululemon expects fourth-quarter revenues in the range of $670–$685 million, with comps growth in the mid-single digits. Earnings are expected to be in the band of 75–78 cents per share.
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 are both pegged at 80 cents.
Zacks Rank: Lululemon currently has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.
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:
Constellation Brands Inc. STZ has an Earnings ESP of +0.89% and a Zacks Rank #2 (Buy).
Walgreens Boots Alliance Inc. WBA has an Earnings ESP of +2.36% and a Zacks Rank #3.
Ollie's Bargain Outlet Holdings Inc. OLLI has an Earnings ESP of +3.70% and a Zacks Rank #3.
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