Ulta Salon (ULTA) Surges After Strong Second Quarter Earnings and Solid Guidance
Shares of cosmetics superstore Ulta Salon Cosmetics & Fragrance (ULTA) surged 17% last week, after the company announced an update to its third quarter earnings guidance. The company announced that its earnings would come in between $0.71 to $0.74 per share, still lower than the Thomson Reuters consensus estimate of $0.76, but its revenue guidance of $613 million to $623 million was in line with the $618.7 million that analysts had expected.
This revised guidance came after robust second quarter earnings in which both earnings and revenue topped Wall Street expectations. Daily Chart
Last quarter, Ulta Salon earned $0.70 per share, topping the consensus estimate by three cents per share, and a 30% year-on-year jump from the prior quarter's results. Revenue surged 24.8% to $601 million, also topping the $588.37 million that analysts had expected. Ulta's business model is unique in that it offers salon services in its cosmetics superstores. Therefore, the two halves of the business are mutually dependent on each other and have helped the company report double-digit top and bottom line growth. As such, Ulta occupies a unique niche market with only partial competition from superstores like Wal-Mart (WMT
) or specialty retailers like Sally Beauty Holdings (SBH
). Ulta also produces its own cosmetics and skincare products, which promote brand loyalty and generate more return visits to its salon superstores. Analysts are fairly divided on Ulta's growth potential. Analysts at Citigroup have a "buy" rating on the stock with a $125 price target. Analysts at Goldman Sachs are less optimistic, with a neutral rating at a $100 price target. On a similar note, Jefferies Group has a "buy" rating as well, and raised its price target to $110 -- lower than the stock's price at the time of this writing. Shares have had a bumpy ride this year following CEO Chuck Rubin's resignation in February. Rubin was replaced by current CEO Mary Dillon. The main concern about Ulta is its lofty valuation. The stock trades at 40 times trailing earnings and has already climbed more than 700% over the past five years. Its forward P/E of 28 isn't that much cheaper, but its 5-year PEG ratio of 1.5 suggests that the stock will continue rising, albeit at a slower rate than the past few years. Other News About ULTA Why Ulta Salon Shares Looked Stunning Today
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Published on Sep 20, 2013
By Leo Sun