Ulta’s Stock Soars Nearly 30% After Solid Earnings Report

Ulta beat investor expectations on earnings during Q3.

Ulta Beauty is up 29% after delivering a better-than-expected earnings report and updating its full-year guidance. The company fell slightly short on revenue but beat Wall Street’s forecasts on earnings. Here is an overview of how the company fared during the third quarter, and what’s next for Ulta in 2020.

Ulta beats investor expectations during Q3

Ulta indeed beat investor expectations during the third quarter. But the truth is, most investors had very low expectations going into this latest earnings report. 

When Ulta reported its second-quarter earnings in August, the company lowered its 2019 guidance and missed earnings estimates. In the months following the earnings report, the company’s shares dropped by more than 30%.

So going into the company’s third-quarter earnings, investors were bracing themselves for the bad news. But Ulta reported earnings of $2.25 per share, beating Wall Street’s estimates of $2.13 per share. Revenue was up by more than 7% from a year earlier, and the company matched same-store sales estimates. 

And most importantly, Ulta updated its full-year guidance, and it’s much more positive than it was in August. The company expects its same-store and e-commerce sales to grow, and the company plans to open 80 new stores. 

One of the ways Ulta has been able to boost same-store sales is by capitalizing on the demand for celebrity cosmetics lines. In particular, Kylie Jenner and YouTuber James Charles have helped drive more traffic to Ulta’s stores. 

Will the positive momentum last?

Wall Street took notice of the positive turn of events for Ulta, but some analysts cautioned that the problems aren’t over for the company. Wells Fargo analyst Ike Boruchow raised his price target on the stock but warned that many challenges still lie ahead. 

Boruchow said that the cosmetics industry is slowing, which will continue to put pressure on the company. A Nomura analyst also raised his price target but said that he believes that sales in certain categories will stay low in 2020, forcing Ulta to lower its earnings forecasts. 
Overall, the company is considered a moderate buy on Wall Street. We’ll have more insight into Ulta’s 2020 trajectory once we know the company’s full-year earnings.