What’s in the Cards for Ulta Beauty’s (ULTA) Q3 Earnings?

Ulta Beauty, Inc. ULTA is slated to report third-quarter fiscal 2019 results on Dec 5. This leading beauty retailer delivered a negative earnings surprise of 1.1% in the last reported quarter. However, its earnings have outperformed the Zacks Consensus Estimate by 0.5%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fiscal third-quarter earnings has gone down a penny to $2.14 over the past 30 days. This suggests a decrease of 1.8% from the year-ago period’s reported figure. Nonetheless, the consensus mark for revenues is $1,692 million, indicating a rise of 8.1% from the figure reported in the year-ago quarter.

Key Factors to Note

Ulta Beauty has been gaining from its efforts to grow both e-commerce and in-store sales. The store-to-door strategy, mobile app enhancements and the buy online and pick up in store facility have been yielding results. Moreover, Ulta Such moves are likely to help create a seamless digital shopping experience for Ulta Beauty’s customers.

Apart from this, the company’s top line has been benefiting from efforts to enhance beauty product offerings and improve store traffic. In sync with this, the company’s focus on innovation and brand launches bode well. Further, Ulta Beauty’s loyalty program has been a key driver. The company’s excellent marketing and merchandising endeavors have helped the conversion of new guests to members of the program. Moreover, sales through gift cards have been robust, while the credit card program has also been progressing well.

However, Ulta Beauty has been battling rising selling, general and administrative (SG&A) expenses for a while. The company’s expenses are usually allocated toward increasing store labor, growth initiatives and innovation. Further, the company has been making investments in digital channels, salon services, infrastructure and personalization efforts. In the last earnings call, management guided higher SG&A costs for the third quarter of fiscal 2019.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Ulta Beauty this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Ulta Beauty carries a Zacks Rank #3, its Earnings ESP of -2.89% makes surprise prediction difficult.

Stocks With Favorable Combinations

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:

Costco COST currently has an Earnings ESP of +1.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General DG currently has an Earnings ESP of +0.65% and a Zacks Rank #2.

lululemon athletica LULU presently has an Earnings ESP of +0.73% and a Zacks Rank #3.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research