Citi Analysts Bullish on Ulta Beauty Ahead of Q3 Earnings Report
Citi analysts are optimistic about Ulta Beauty’s upcoming Q3 earnings report, predicting that the company will exceed consensus EPS estimates. In a note released on Friday, Citi expects Ulta to report earnings of $4.69 per share, higher than the consensus estimate of $4.49.
According to Citi, the expected outperformance is due to stronger-than-anticipated comparable sales and slightly better gross margins. While the company is facing headwinds from weakening category trends and increased competition, the analysts believe that trends have not worsened since the second quarter and expect management to narrow their full-year 2024 EPS guidance range, taking the worst-case scenario off the table.
As a result, Citi forecasts that the company’s Q4 EPS guidance will be in line with the consensus estimate of $6.80. The current guidance range of $22.60-$23.50 is expected to shift to $22.90-$23.50.
Citi also raised its price target on Ulta to $390 from $345, reflecting higher estimates for fiscal 2024 and 2025. The bank projects FY24 and FY25 EPS at $23.18 and $22.68, respectively, up from prior estimates of $22.95 and $20.75.
Citi also highlighted Ulta’s trading multiple of 18x FY25 earnings as offering balanced risk/reward, with sentiment skewing negative among investors. The bank believes that some investors are more willing to own Ulta now that management has already provided preliminary FY25 guidance and current trends do not seem to be deteriorating further.