Ulta Beauty Stock Jumps; Analysts Praise Q3 Beat

The beauty-products retailer beat estimates and sharpened its outlook.
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Ulta Beauty on Friday drew bullish remarks from analysts at Deutsche Bank, Cowen and JPMorgan, and buying interest from investors, following the beauty-products retailer's third-quarter-earnings beat.

Ulta shares at last check on Friday were up 12% to $264.89. 

For the quarter ended Nov. 2 the Bolingbrook, Ill., company reported earnings of $2.25 a  share compared with $2.18 in the year-earlier quarter. Analysts polled by FactSet were estimating the company earned $2.13.

Revenue reached $1.68 billion from $1.56 billion, a 7.9% year-over-year increase. Analysts were looking for revenue of $1.69 billion.

The company also sharpened its fiscal 2020 earnings outlook to between $11.93 and $12.03 a share from its previous view of $11.86 to $12.06 per share.

Analysts at Deutsche Bank said the quarter should alleviate “most (but not all) investor fears.” The firm reiterated a buy rating and $287 price target.

“We find ULTA attractive as we think the company will: 1) grow same-store sales in the 3% to 5% range; 2) deliver square-footage growth in the years ahead with international upside; and 3) have the opportunity to improve EBIT margin,” analyst Paul Trussell wrote.

Meanwhile, analysts at JPMorgan wrote that Ulta Beauty is clearing hurdles. The firm reiterated an overweight rating and raised its price target to $326 from $317.

“Two of the four hurdles that we said were needed for the stock to get rerated back into the retail winners bucket (20-25 time PE) were nicely leaped with much better than expected 3Q earnings ([comparables and gross margin] above the buy-side bar we previewed and beating actual consensus), and the fourth-quarter guide maintained (again, more than better than feared),” analyst Christopher Horvers said.

Cowen reiterated an outperform rating with a $300 price target.

ULTA "is making tactical strides by aggressively partnering with brands to develop incremental innovation," analyst Oliver Chen wrote. 

And "the franchise remains a powerful share gainer given newness (contributed 25% of third-quarter comp growth), its data advantage, and its loyalty program."

Ulta Beauty is Real Money's Stock of the Day.