Lululemon Athletica Q4 Earnings Preview: Analyst Sees 'Buying Opportunity' With Positive Risk/Reward

Apparel company Lululemon Athletica Inc LULU could continue a streak of beating analyst estimates for revenue and earnings per share when the company reports fourth-quarter financial results after market close Thursday.

Here are the analyst estimates, commentary from an analyst ahead of earnings, and key items to watch.

Earnings Estimates: Analysts expect Lululemon to report fourth-quarter revenue of $3.57 billion, up from $3.21 billion in last year's fourth quarter, according to data from Benzinga Pro.

The company beat analysts’ revenue estimates in the third quarter, and has beaten estimates in nine of the last 10 quarters overall.

Analysts expect Lululemon to report fourth-quarter earnings per share of $5.85, up from $5.29 in last year's fourth quarter.

The company has beaten analyst estimates for earnings per share in more than 10 straight quarters.

Guidance from the company calls for fourth-quarter revenue to be in a range of $3.475 billion to $3.51 billion. The company expects earnings per share to be in a range of $5.56 to $5.64.

What Analysts Are Saying: Lululemon stock has strong trends and a favorable risk/reward heading into earnings, Needham analyst Tom Nikic said in a recent investor note.

The analyst reiterated a Buy rating and lowered the price target from $475 to $430.

"Despite concerns about a post-holiday lull, we believe that trends improved in recent weeks. This is the key to the LULU story because a primary strategy to reinvigorate the U.S. business is an increase in seasonal newness," Nikic said.

The analyst said if trends are strong now when the weather is warming, that's an encouraging sign.

“If LULU can follow up a strong Holiday season with a strong transition to Spring selling, we think that is far more indicative of the health of the business than a slowdown in Jan/Feb (the smallest retail months of the year).”

The analyst said Google searches for Lululemon in the United States are increasing, and the number of sale items on the company's website is declining, further proof of the company's plan working.

"We view risk/reward positively."

Nikic said Lululemon gets around 40% of revenue outside the United States and only sources around 3% of goods from China, giving the company a minimal risk when it comes to tariffs. The analyst said this is assuming only Chinese imported items are affected.

"We believe that this is a buying opportunity in LULU shares, as we believe that trends have shown improvement in recent weeks."

Here are other recent analyst ratings on Lululemon and their price targets:

Citigroup: Maintained Neutral rating, lowered price target from $380 to $330
Telsey: Maintained Outperform rating, with $445 price target
Morgan Stanley: Maintained Overweight rating, lowered price target from $420 to $411

Key Items to Watch: Tariffs could be one of the biggest topics in the company's commentary. While Nikic said the company was not highly exposed to China, Lululemon is a Canadian-based company that could see a negative impact from tariffs on Canada.

International sales will also be another key item to watch. In the third-quarter, international revenue was up 33% year-over-year, outpacing Americas net revenue growth of 2% year-over-year. The company continues to push expansion into new territories and expand brand awareness outside of North America.

Benzinga readers are eagerly awaiting Lululemon's earnings report, with the stock recently appearing on the Stock Whisper Index, which highlights stocks seeing elevated search demand from Benzinga Pro users.

The increased attention is common before or after earnings reports or around key catalysts for companies.

LULU Price Action: Lululemon stock is down 0.1% to $337.00 on Wednesday versus a 52-week trading range of $226.19 to $423.32. Lululemon stock is down 10.5% year-to-date in 2024 and down 13.7% over the last year.

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