On Tuesday, BMO Capital Markets updated its outlook on ULTA Beauty (NASDAQ: ULTA) sh, raising the price target to $467 from the previous target of $420, while maintaining a Market Perform rating. The adjustment follows ULTA's announcement of leadership changes and better-than-anticipated holiday sales performance.
The beauty retailer, with a market capitalization of $20.7 billion and annual revenue of $11.4 billion, maintains a strong financial position according to InvestingPro data, with 15 analysts recently revising their earnings expectations upward.
ULTA Beauty revealed after markets closed on Monday that its CEO, Dave Kimbell, will retire. Kecia Steelman, who has been with the company since 2014 and served as President and COO since 2023, will take over as President and CEO.
Alongside this announcement, ULTA also reported stronger holiday sales than expected, leading to an increase in the fourth-quarter guidance. Comparable store sales, which were previously expected to decline, are now projected to modestly increase compared to the prior guidance of a low single-digit percentage drop and analysts' expectations of around a 1.4% decrease.
The company's solid operational performance is reflected in its healthy gross profit margin of 42.5% and strong liquidity position with a current ratio of 1.63, as reported by InvestingPro.
Additionally, ULTA anticipates the earnings before interest and taxes (EBIT) margin to exceed the top end of the previously guided range of 11.6-12.4%, with the Street forecasting approximately 12.2%. This update follows a pattern from the third quarter, where ULTA raised its full-year guidance after reducing it in the first and second quarters. At that time, BMO had indicated that the raised guidance might still be conservative.
BMO's revised price target of $467 is based on approximately 20 times the estimated fiscal year 2025 earnings per share, excluding certain items. The firm also noted that, according to their SKU tracking, the number of sale items on ULTA's website post-Christmas has decreased year-over-year, indicating healthier inventory levels. However, this was contrasted by a noted increase in sale items during December.
In other recent news, ULTA Beauty has seen a series of noteworthy developments. The company has announced a CEO transition with Dave Kimbell stepping down and President and COO Kecia Steelman stepping up to lead. This development followed an upward revision of the company's fourth fiscal quarter sales and margin guidance, supported by a strong holiday season.
In response to these developments, several analyst firms have adjusted their price targets for ULTA Beauty. Piper Sandler raised the stock price target to $425, maintaining a neutral rating, while Canaccord Genuity increased the target to $538, holding a buy rating.
Wells Fargo (NYSE:WFC), despite raising the price target to $370, kept an underweight rating due to concerns over declining margins. BofA Securities adjusted its price target to $475, retaining a neutral rating, reflecting uncertainty over the company's margin trajectory in the fiscal year 2025.
These recent developments underscore ULTA Beauty's ongoing business momentum and strategic initiatives, which are resonating well with consumers. However, some analysts express caution due to the anticipated margin trajectory for fiscal year 2025.
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