Ulta Beauty earnings preview: will the run continue?

In recent times, Ulta Beauty (ULTA) has seen an impressive resurgence, with its stock hitting record highs. This upward momentum is credited to a mix of favorable industry trends and positive updates from competitors and partners. With this backdrop, there's high anticipation for Ulta's FY25 outlook as it prepares to unveil its Q4 (Jan) financial performance.

Analysts predict a 13% year-on-year rise in adjusted EPS to $7.53 for Q4, alongside a 9% increase in revenue to $3.53 billion. After a tough 2022, where Ulta's shares fell by 33%, the stock has rebounded, marking a +50% rise in value.

The company's robust Q3 (Oct) results, revealed in early December, played a crucial role in bolstering investor confidence. These results, showcasing strong cosmetic demand, hint at more growth ahead. Ulta's growth is also being fueled by positive news from competitors and retail partners.

For instance, Kohl's (KSS) reported that its Sephora at Kohl's outlets significantly boosted beauty sales in JanQ, with shops opened in 2021 and 2022 experiencing over +25% sales growth. Victoria's Secret (VSCO) noted its beauty segment as the leading performer in merchandise category growth during the quarter. Likewise, Ulta Beauty at Target (TGT) has been enhancing traffic, sales, and loyalty for the retailer.

On the manufacturing side, companies like e.l.f. Beauty (ELF) have seen beneficial industry tailwinds. ELF boasted an 85% sales surge in DecQ, its 20th successive quarter of net sales growth at a minimum of +20%. The shift towards value brands like ELF, driven by inflation's impact on consumer spending, has played to Ulta Beauty's advantage.

Coty (COTY) also delivered promising DecQ outcomes, with growth in its Prestige and Consumer Beauty segments.

With numerous positive signals from the beauty sector, expectations are high for Ulta Beauty's Q4 disclosures. The focus will be on the company's FY25 guidance, crucial for future stock performance, as it usually includes earnings, sales, and comp projections.

In summary, Ulta Beauty's growth prospects and investment appeal look bright amid a thriving cosmetics market, strategic alliances, and a tilt towards value products. With a forward P/E ratio of 21.01, ULTA presents a compelling choice for those interested in the Consumer Cyclical sector. Nonetheless, the upcoming Q4 results and FY25 outlook will be essential for confirming its ongoing growth path.