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Ulta Beauty Leaps 5% on Stellar Q2 Results & Upbeat Guidance

Ulta Beauty, Inc. (ULTA) shares jumped almost 5% in Wednesday’s extended trading session after the company delivered blowout second-quarter results topping analysts’ expectations.

Besides its upbeat Q2 earnings results, the company raised guidance for the remainder of 2021, leaving investors enthusiastic about the stock.

The quarterly beat was driven by strong momentum in overall consumer confidence and a rebound in the beauty category, aided by eased COVID-19-induced restrictions.

Notably, shares of the largest U.S. beauty retailer, with a current market capitalization of over $20 billion, have gained almost 77% over the past year.

Markedly, the company reported EPS of $4.56, significantly beating analysts’ estimates of $2.42 per share. The company reported earnings of $0.14 per share in the same quarter last year.

Furthermore, net sales jumped 60.2% year-over-year to $2 billion and exceeded consensus estimates of $1.72 billion.

Comparable sales jumped 56.3% versus a decline of 26.7% in the prior-year quarter. This reflects 52.5% growth in transactions and a 2.5% jump in average ticket sales. (See Ulta Beauty stock charts on TipRanks)

On top of this, gross margins jumped 13.8 percentage points to 40.6% compared to 26.8% in the year-ago period. The improvement was driven by the leveraging of fixed costs and salon expenses, as well as improved merchandise margins and favorable channel mix shifts.

Following the results, Ulta Beauty CEO Dave Kimbell commented, “Our value proposition is strong, and we are evolving and innovating to lead in the new beauty landscape, capture additional market share, and drive profitable growth.”

Ulta Beauty Raised Fiscal 2021 Outlook

Based on the robust Q2 results, management raised its financial guidance for FY2021 well above analysts’ expectations.

EPS is expected to be in the range of $14.50 to $14.70, up from the prior forecast range of $11.50 – $11.95, while the consensus estimate is pegged at $12.28 per share.  

Sales are now expected to range between $8.1 billion and $8.3 billion versus the prior guidance range of $7.7 – $7.8 billion. The consensus estimate stands at $7.88 billion.

Additionally, comparable sales are forecast to increase 30% – 32% versus the prior guidance range of 23% to 25%.

Ahead of the Q2 results, Deutsche Bank analyst Krisztina Katai increased the price target from $410 to $417 (7% upside potential) while reiterating a Buy rating on the stock.

Consensus among analysts is a Moderate Buy based on 14 Buys and 6 Holds. The average Ulta Beauty price target of $387.11 implies that shares are fully valued at current levels.

ULTA scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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