Ulta Beauty Stock Rises After Smashing Consensus and Hiking Outlook, Jefferies Upgrades to Buy

© Reuters Ulta Beauty (ULTA) Stock Rises After Smashing Consensus and Hiking Outlook, Jefferies Upgrades to Buy

By Senad Karaahmetovic

Shares of Ulta Beauty (NASDAQ:ULTA) are up more than 9% in premarket trading Friday after the company hiked its EPS and revenue guidance for the full year, topping the analyst estimates.

ULTA reported a Q1 EPS of $6.30, compared to $4.10 in the year-ago period and crushing the consensus estimates of $4.45 per share. Net sales stood at $2.35 billion, up 21% YoY and above the consensus projection of $2.12 billion.

Comparable sales rose 18% in the period, compared to the 65.9% growth in the year-ago period, while analysts were projecting growth of 7.72%. The Q1 gross margin stood at 40.1%, compared to 38.9% in the year-ago period, while analysts were expecting 38.5%. Ulta reported $1.57 billion in merchandise inventories, up 16% YoY and topping the analyst expectations of $1.53 billion.

For the FY 2023, the company expects EPS in the range of $19.20 to $20.21, up from the prior forecast of $18.20 to $18.70, and topping the projected $18.82 per share. Ulta expects FY net sales to land between $9.35 billion and $9.55 billion, up from $9.05 billion to $9.15 billion, and compared to the estimates of $9.19 billion.

Piper Sandler analyst Korinne Wolfmeyer hiked the price target to $485.00 per share from $465.00 after the company delivered “a strong Q1 report that beat across pretty much all metrics and raised guidance on the top and bottom lines.”

“Consumers are returning to the stores ready to spend, and makeup is finally seeing a rebound. While there are a number of factors impacting margins (mainly macro-driven plus some strategic investments), management still raised EBIT guidance by ~40bp at the mid-point, and we think that could even be conservative. Longer term, we continue to like the trajectory here and think there's opportunity for upside as one of the more resilient names in beauty continues to grow and scale,” Wolfmeyer told clients.

Jefferies analyst Stephanie Wissink upgraded ULTA from Hold to Buy with a price target of $475.00 (from $400.00).

The analyst wrote that ULTA’s results show that demand had returned to pre-pandemic levels with improving and sustained momentum.