Lululemon Athletica (NASDAQ: LULU) closed at $120.32 in the most recent trading session, posting a gain of 2.11% and outpacing the S&P 500’s modest 0.21% advance on the day.
The Dow Jones Industrial Average climbed 1.03% during the same session, while the tech-heavy Nasdaq slipped 0.22%, making LULU’s performance stand out across the broader market.
Over the past month, LULU shares have appreciated by 3.1%, beating both the Consumer Discretionary sector’s loss of 0.15% and the S&P 500’s gain of 1.7%.
Despite recent price strength, analysts are bracing for a significant earnings contraction when the athletic apparel maker reports its upcoming quarterly results.
The Zacks Consensus Estimate calls for earnings of $1.79 per share in the next report, which would represent a year-over-year decline of 42.26% from the comparable prior period.
Revenue expectations are similarly subdued, with the consensus projecting net sales of $2.47 billion, a decrease of 2.26% compared to the same period a year ago.
For the full fiscal year, analysts are forecasting earnings of $10.94 per share and total revenue of $11.08 billion, representing year-over-year changes of -17.5% and -0.22% respectively.
Adding further pressure to the stock’s near-term outlook, the Zacks Consensus EPS estimate has moved 1.77% lower over the past month, reflecting growing caution among analysts covering the company.
Lululemon currently carries a Zacks Rank of #5 (Strong Sell), the lowest rating in a system that ranges from #1 (Strong Buy) to #5, with #1-ranked stocks having generated an average annual return of +25% since 1988.
On the valuation front, LULU trades at a Forward P/E ratio of 10.77, a notable discount to its industry’s average Forward P/E of 16.28, which may attract value-focused investors watching the stock closely.
However, the company’s PEG ratio of 3.86 sits well above its industry’s average PEG ratio of 2.17, suggesting the stock’s expected earnings growth does not fully justify its current price relative to peers.
The Textile-Apparel industry, within which Lululemon competes, currently holds a Zacks Industry Rank of 178, placing it in the bottom 28% of more than 250 industries tracked by the research firm.
Research from Zacks indicates that the top 50% of ranked industries outperform the bottom half by a factor of 2 to 1, a dynamic that adds headwinds for stocks operating in lower-ranked sectors.
Investors will be watching closely for any further shifts in analyst estimates ahead of Lululemon’s earnings release, as those revisions tend to be among the most reliable early indicators of near-term stock price direction.
