Nasdaq-Listed Companies

Lululemon Athletica Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

A week ago, Lululemon Athletica Inc. (NASDAQ:LULU) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. It was overall a positive result, with revenues beating expectations by 8.6% to hit US$1.2b. Lululemon Athletica also reported a statutory profit of US$1.11, which was an impressive 23% above what the analysts had forecast. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

earnings-and-revenue-growthNasdaqGS:LULU Earnings and Revenue Growth June 5th 2021

Following the latest results, Lululemon Athletica's 27 analysts are now forecasting revenues of US$5.86b in 2022. This would be a solid 18% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to bounce 25% to US$6.79. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$5.67b and earnings per share (EPS) of US$6.38 in 2022. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$380, suggesting that the forecast performance does not have a long term impact on the company's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Lululemon Athletica at US$450 per share, while the most bearish prices it at US$166. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analysts are definitely expecting Lululemon Athletica's growth to accelerate, with the forecast 24% annualised growth to the end of 2022 ranking favourably alongside historical growth of 16% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.3% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Lululemon Athletica is expected to grow much faster than its industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Lululemon Athletica following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Lululemon Athletica going out to 2026, and you can see them free on our platform here..

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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