'Things Are Getting Tougher' For Ulta Beauty: 3 Analysts Deep Dive Solid Q3 Beat

Shares of Ulta Beauty Inc ULTA jumped in premarket trading on Friday, after the company reported upbeat third-quarter earnings.

The results came amid an exciting earnings season. Here are some key analyst takeaways from the earnings release.

• Piper Sandler analyst Korinne Wolfmeyer maintained an Overweight rating, while raising the price target from $540 to $572.
• BMO Capital Markets analyst Simeon Siegel reiterated a Market Perform rating and price target of $485.
• Telsey Advisory Group analyst Dana Telsey reaffirmed an Outperform rating and price target of $600.

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Piper Sandler: Ulta "is navigating well through a challenging consumer environment," Wolfmeyer noted, citing how the bottom line "beat the Street by 11 cents."

“Things are getting tougher heading into FQ4, and management is pulling on heavier promotional activity and leaning more into marketing,” the analyst stated. Management has been "prudent" in laying out expectations for the year, she added.

BMO Capital Markets: Ulta delivered a third-quarter beat on the back of “a slight sales beat and slightly better-than-expected Gross Margin,” Siegel said. “Like the rest of retail, shrink remained a headwind, but may become less of a pressure point in 4Q given LY's compare,” he added.

“We have been discussing our belief that ULTA had become a favored short this quarter (driven by third-party data reads, with fears of a GM miss and cut), and this result should prove more than enough to take shares higher,” the analyst stated.

Telsey Advisory Group: Ulta's reported earnings of $5.07 per share, higher than the consensus estimate of $4.96 per share, “driven by outperformance across the board, including modestly better sales growth, gross margin deleverage, and cost control,” Telsey said in a note.

“The topline growth reflected strength in new stores and growth in other revenue along with the mid-single digit comp that was driven by a 5.9% increase in transactions, partially offset by a 1.4% decrease in average ticket,” the analyst wrote. “Gross margin contracted 130 bps to 39.9%, better than the consensus of down 140 bps to 39.8%, attributable to lower merchandise margin, higher shrink, and elevated supply chain costs, slightly offset by growth in other revenue."

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ULTA Price Action: Shares of Ulta Beauty rose by 11.27% to $474.00 in the premarket session on Friday.