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Surging Earnings Estimates Signal Upside for Lululemon (LULU) Stock

Lululemon (LULU) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

Analysts' growing optimism on the earnings prospects of this athletic apparel maker is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Lululemon, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The earnings estimate of $1.39 per share for the current quarter represents a change of +19.83% from the number reported a year ago.

The Zacks Consensus Estimate for Lululemon has increased 6.06% over the last 30 days, as eight estimates have gone higher while one has gone lower.

Current-Year Estimate Revisions

The company is expected to earn $7.62 per share for the full year, which represents a change of +62.13% from the prior-year number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Lululemon. Over the past month, 11 estimates have moved higher compared to one negative revision, helping the consensus estimate increase 9.21%.

Favorable Zacks Rank

The promising estimate revisions have helped Lululemon earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

While strong estimate revisions for Lululemon have attracted decent investments and pushed the stock 7.1% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.


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lululemon athletica inc. (LULU): Free Stock Analysis Report
 
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