NEW YORK (TheStreet) -- Shares of Lululemon Athletica (LULU) - Get Report were gaining 5.8% to $62 in pre-market trading Monday after the athletic clothing retailer raised its fourth quarter guidance.
Lululemon now expects to report earnings of 71 cents to 73 cents a share for the fourth quarter, up from its previous estimates of 65 cents to 69 cents a share. The company expects revenue of $595 million to $600 million for the quarter, up from a previous guidance of $570 million to $585 million, based on a 6% to 7% increase in comparable-store sales.
Analysts surveyed by Thomson Reuters expect Lululemon to report earnings of 69 cents a share and revenue of $584.71 million for the fourth quarter.
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TheStreet Ratings team rates LULULEMON ATHLETICA INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate LULULEMON ATHLETICA INC (LULU) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 17.0%. Since the same quarter one year prior, revenues rose by 10.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- LULU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.36, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 79.50% to $42.86 million when compared to the same quarter last year. In addition, LULULEMON ATHLETICA INC has also modestly surpassed the industry average cash flow growth rate of 70.34%.
- The gross profit margin for LULULEMON ATHLETICA INC is rather high; currently it is at 54.05%. Regardless of LULU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LULU's net profit margin of 14.41% compares favorably to the industry average.
- In its most recent trading session, LULU has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full analysis from the report here: LULU Ratings Report