On Tuesday, JPMorgan (NYSE:JPM) reaffirmed its Overweight rating and a $472.00 stock price target for ULTA Beauty (NASDAQ: ULTA), following an uptick in beauty product sales.
The analyst highlighted that total beauty product sales in the Food, Drug, and Mass channels rose by 1.3% in the four weeks leading up to November 2nd, marking an improvement over the previous month's flat growth, which was later revised up by 20 basis points. This increase comes despite the impact of hurricanes Helene and Milton, which made landfall on September 26 and October 9, respectively.
According to the analyst, quarter-to-date trends through October 19, 2024, showed a year-over-year increase of approximately 0.7%, now slightly up to 0.8%, primarily driven by gains in cosmetics and fragrance sales. The firm drew a connection between these trends and ULTA's same-store sales, noting a 64% correlation with NielsenIQ cosmetics trends and nearly 50% with overall beauty product sales.
The report also indicated that while one-year trends in beauty categories have accelerated, particularly in cosmetics and facial skincare, the five-year trends have shown a deceleration, especially in hand/body lotion and facial skincare categories.
Considering the full period, the one- and two-year total beauty and cosmetics trends suggest that ULTA could report a 1-2% comp decline in the third quarter of 2024, which is a slight improvement from the previously anticipated 1-3% decline.
The analyst recalled that ULTA's management had indicated an acceleration in quarter-to-date trends as of August 29, moving from a weak July to a roughly 1% downturn, inclusive of headwinds from an earlier 21 Days of Beauty event compared to the previous year. Moreover, ULTA reiterated its full-year 2024 guidance during its in-person Investor Day held in Chicago last month.
ULTA Beauty is scheduled to announce its third-quarter 2024 earnings on Thursday, December 5, 2024, after the market closes, with a conference call expected to follow at 4:30 PM ET.
In other recent news, ULTA Beauty has been the subject of various analyst ratings and adjustments to its long-term financial goals. Citi maintained a Neutral stance with a price target of $345, and BMO (TSX:BMO) Capital reiterated a Market Perform rating with a price target of $385.
Stifel increased its price target to $395, maintaining a Hold rating, and Piper Sandler slightly raised the price target to $357, keeping a Neutral rating.
These analyst ratings come in the wake of ULTA Beauty's revised financial goals which forecast long-term operating margins of 12% and net sales growth of 4%-6%. The company also plans to increase its number of stores by 200 over the next three years. ULTA Beauty's management set a cautious tone for 2025, suggesting that comparable store sales might grow at a rate below the 3-4% expectation and that operating margins could be under 12%.
Analysts' consensus for ULTA's 2025 earnings per share seems to be converging around $23, slightly below the prior consensus of $24.60. This is due to factors such as unit growth, comps, margin declines, and earnings per share growth driven by share repurchases. The company also announced a new $3 billion share repurchase authorization.
These are recent developments in the financial landscape of ULTA Beauty, reflecting the company's strategic adjustments and the analysts' varied perspectives. The company's future performance will continue to be closely monitored by investors and analysts alike.
InvestingPro Insights
To complement JPMorgan's analysis of ULTA Beauty, recent data from InvestingPro offers additional context for investors. ULTA's market capitalization stands at $17.93 billion, with a P/E ratio of 15.23, suggesting a relatively moderate valuation compared to some high-growth retail stocks. The company's revenue for the last twelve months reached $11.32 billion, with a modest growth of 5.51%, aligning with the analyst's observations on beauty product sales trends.
InvestingPro Tips highlight that ULTA operates with a moderate level of debt and maintains liquid assets that exceed short-term obligations, indicating a solid financial position. This financial stability could be crucial as the company navigates the fluctuating beauty product sales environment described in the article.
Interestingly, while JPMorgan maintains an Overweight rating, InvestingPro notes that 9 analysts have revised their earnings downwards for the upcoming period. This divergence in analyst sentiment adds an element of caution to the overall positive outlook presented in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for ULTA Beauty, providing a broader perspective on the company's financial health and market position.
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