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

Investors are looking forward to Lululemon's (LULU - Free Report) upcoming earnings report, set to be released on December 5, 2024. The market anticipates a year-over-year increase in earnings, supported by higher revenue streams. This outlook is essential in understanding the company's financial performance but the stock price's immediate reaction will depend on how the actual results align with these expectations.

Should the earnings numbers exceed analysts' projections, the stock is likely to see a positive uptick. Conversely, if the results fall short, a decline in stock value could occur.

The sustainability of any immediate price change will largely depend on how management discusses current business conditions during the earnings call. Understanding the likelihood of a positive EPS (earnings per share) surprise can further inform investor decisions.

Zacks Consensus Estimate

For the upcoming quarter, Lululemon is expected to report earnings of $2.69 per share, reflecting a 6.3% increase compared to the same period last year. Revenue projections stand at $2.35 billion, representing a 6.8% growth from the previous year.

Estimate Revisions Trend

In the last month, the consensus EPS estimate has been revised down by 0.43%, indicating that analysts have reassessed their expectations for the company.

It's important to consider that a collective change in estimates might not reflect the revisions made by individual analysts.

Earnings Whisper

Subtle changes in estimates can provide insight into the business conditions leading up to the earnings announcement. The Zacks Earnings ESP (Expected Surprise Prediction) model plays a key role in this analysis.

The Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate. The Most Accurate Estimate is an updated version of the Consensus Estimate, reflecting the most recent analysis. Changes in analysts' estimates prior to the earnings release are valuable indicators of potential accuracy.

A positive Earnings ESP indicates a strong likelihood of an earnings beat, especially when paired with a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold). Research shows that stocks in this category achieve positive surprises nearly 70% of the time, and a strong Zacks Rank enhances the predictive power of Earnings ESP.

Conversely, a negative Earnings ESP does not guarantee an earnings miss. Historical data shows that making predictions for companies with negative Earnings ESP readings is challenging.

How Have the Numbers Shaped Up for Lululemon?

Lululemon’s Most Accurate Estimate exceeds the Zacks Consensus Estimate, indicating growing optimism among analysts regarding the company’s earnings potential. This results in an Earnings ESP of +0.45%.

Currently, Lululemon holds a Zacks Rank of #3, suggesting that there is a reasonable chance for the company to exceed the consensus EPS estimate.

Does Earnings Surprise History Hold Any Clue?

To make accurate future projections, analysts often review how companies have performed against past estimates. Lululemon's recent performance showcases its ability to deliver, as it surpassed expected earnings in the last reported quarter, earning $3.15 against the estimated $2.92, marking a surprise of +7.88%.

Over the last four quarters, Lululemon consistently beat consensus EPS estimates.

Bottom Line

While an earnings beat or miss can influence short-term stock direction, other factors also play a significant role in market reactions. Stocks may decline despite posting positive earnings due to dissatisfaction with guidance or other factors. Similarly, certain stocks may surge after a earnings miss if there are unexpected positive catalysts.

Investing in stocks that are likely to exceed earnings expectations can improve your chances of success. Therefore, evaluating a company's Earnings ESP and Zacks Rank prior to their quarterly release is an advisable strategy. Use the Earnings ESP Filter to find optimal buy or sell opportunities before earnings reports.

Lululemon presents a strong case as a potential earnings-beat candidate. However, investors should also consider other influencing factors before deciding whether to invest in this stock prior to its earnings release.

An Industry Player's Expected Results

In contrast, PVH (PVH - Free Report), also part of the Zacks Textile - Apparel industry, is projected to report earnings of $2.61 for the quarter ending October 2024. This represents a year-over-year decline of 10%, with anticipated revenues of $2.22 billion, down by 5.9% compared to last year.

The consensus EPS estimate for PVH has seen a marginal upward revision of 0.3% over the past month. Despite this, a lower Most Accurate Estimate has resulted in an Earnings ESP of -1.46%.

Combined with a Zacks Rank of #3 (Hold), predicting the likelihood of PVH surpassing the consensus EPS estimate remains uncertain. Nonetheless, PVH has successfully exceeded consensus estimates in each of its past four quarters.

Stay updated with upcoming earnings announcements using available Earnings Calendars.

Lululemon, Earnings, Forecast