On Friday, Raymond (NS:RYMD) James maintained a positive outlook on Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU), raising the price target to $400 from $355, while reiterating an Outperform rating. The firm's analyst cited Lululemon's third-quarter earnings beat and the brand's sustained growth prospects, particularly in international markets and its men's segment.
According to InvestingPro data, LULU maintains impressive gross profit margins of 58.5% and shows strong financial health with an overall score of "GREAT," supporting the positive outlook.
The analyst noted that Lululemon's third-quarter results exceeded expectations, with earnings per share (EPS) of $2.87, surpassing both Raymond James's estimate of $2.75 and the Street's $2.71. Revenue grew by 9% to $2.40 billion, also outperforming the anticipated 7% increase.
The company's EBIT margin improved by 70 basis points to 20.5%, which was better than Raymond James's and the Street's expectations. This performance aligns with InvestingPro's analysis, which highlights LULU's strong revenue growth of 13% over the last twelve months and reveals 10+ additional ProTips available to subscribers.
The improvement in the Americas was highlighted, showing a quarter-over-quarter increase to 2.2% from 1.3%, signaling a positive response to new product offerings. This trend is expected to continue into the fourth quarter of 2024 and the first quarter of 2025. The international segment, particularly China, remained robust with growth of 36%, excluding foreign exchange effects.
Early indications of the holiday season sales were positive, including benefits from full-price selling. Lululemon also raised its full-year 2024 guidance to the higher end of the previous range for revenue. While the gross margin percentage contributed to the EBIT beat, increased selling, general, and administrative expenses (SG&A) moderated the upside. Fourth-quarter EBIT margin guidance was set below Street expectations due to planned investments.
Looking ahead, Raymond James projects low single-digit percentage growth for America's revenue in the fourth quarter and fiscal year 2025, driven by product innovation. The firm anticipates that international growth will remain robust, given the under-penetration in those markets. EBIT margin forecasts are more challenging due to higher SG&A, but the belief is that Lululemon has flexibility to outperform if planned growth initiatives fall short.
In other recent news, Lululemon Athletica Inc. has seen a series of developments that investors may find noteworthy.
The company's third-quarter sales and earnings per share outperformed consensus estimates, largely due to stronger international sales and gross margin. Lululemon's fourth-quarter earnings guidance aligns with consensus expectations, despite a slight year-over-year decrease in markdowns. Citi, maintaining a neutral stance, has upgraded Lululemon's price target to $380, while TD (TSX:TD) Cowen adjusted the company's price target to $383, sustaining a buy rating.
Piper Sandler also maintained a neutral rating on Lululemon, with a consistent price target of $260.00. Amidst these developments, Lululemon reported a 7% rise in second-quarter total revenue to $2.4 billion, and earnings per share of $3.15, surpassing the expected $2.94. However, the fiscal year 2024 sales growth forecast was revised from 11-12% to 8-9%.
Analyst firms like Morgan Stanley (NYSE:MS), Baird, and Truist Securities have responded positively to these developments, maintaining their positive ratings and adjusting their price targets to reflect current trends.
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