LULU Stock: Lululemon Tops 1Q Profit Forecasts

Lululemon

LULU Stock Drops as Company Offers a Soft View on the Current Period

Lululemon Athletica Inc. (LULU) reported first-quarter 2016 results before the market opened today that exceeded Wall Street’s expectations. Revenue came in at $495.5 million, up 17.0% from a year ago and well ahead of consensus estimate of $487.82 million. EPS was reported at $0.33, $0.02 higher than the Street’s consensus estimate. Net income however, dropped to $45.3 million, or $0.33 per share, in the first quarter ended May 1 from $47.8 million, or $0.34 per share, a year earlier.

The athletic apparel maker also offered guidance for the current period, saying revenue should be somewhere between $505 million to $515 million, above the $513.59 million million Wall Street was anticipating. The management also gave its bottom line range of $0.36-$0.38 per share, against projections of $0.39 per share.

Laurent Potdevin, lululemon’s CEO, said in a statement: “We are pleased with our first quarter performance, delivering strong sales results and gross margin that exceeded expectations. We finished the quarter with our inventory levels rebalanced and on track to achieve our goals for the year.”

For full fiscal year 2016, the company said it sees EPS in the range of $2.05 to $2.15 per share, with revenue ranging from $2.31 billion to $2.35 billion.

Price Action

In pre-market trading, Lululemon’s shares were down 3 percent to $66.12 following the good earnings report. Shares have advanced 8.49% in the last 4 weeks and 9.51% in the past three months. Over the past 5 trading sessions the stock has gained 4.78%.

Valuation

Lululemon stock trades at a trailing-12 P/E of 36.05, a forward P/E of 26.83 and a P/E to growth ratio of 2.02. The median Wall Street price target on the name is $75.00 with a high target of $85.00. Currently ticker boasts 20 ‘Buy’ endorsements, compared to 11 ‘Holds’ and 4 ‘Sell’.

Profitability-wise, Lululemon has a t-12 profit and operating margin of 12.91% and 17.33%, respectively. The $9.36 billion market cap company reported $550 million in cash and cash equivalents vs. $656 million for the quarter ended May 3, 2015.

LULU currently prints a one year return of about 11%, and a year-to-date return of around 30%.

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