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On Friday, Citi analyst Susan Anderson increased the price target for ULTA Beauty (NASDAQ: ULTA) to $450 from the previous target of $425, while keeping a Neutral stock rating. Anderson’s review followed ULTA Beauty’s first-quarter earnings per share (EPS) of $6.70, which surpassed consensus estimates of $5.81, attributed to stronger-than-anticipated comparable store sales (comps) and lower selling, general, and administrative (SG&A) expenses.
ULTA reported a 2.9% rise in comps, defying expectations of flat growth, and marked an improvement in prestige makeup sales, which were flat in the first quarter compared to a low single-digit decline in the fourth quarter. This performance indicates a diminishing impact from competitive pressures, notably the introduction of Sephora at Kohl’s (NYSE:KSS) stores, and suggests that ULTA is executing its business strategies more effectively than the previous year. The company’s strong execution is reflected in its impressive 50% return on equity and healthy liquidity position, with a current ratio of 1.7. InvestingPro subscribers can access detailed financial health metrics and 6 additional exclusive ProTips about ULTA’s performance.
Despite the robust first-quarter results, ULTA’s fiscal 2025 guidance was cautiously increased by only about $0.20 at the mid-point. Management has incorporated a broader range of second-half comps projections, ranging from flat to a low single-digit decline, due to economic uncertainties. Nevertheless, Citi views the fiscal 2025 guidance as conservative and anticipates potential upside, particularly for the second-quarter comps forecast, which is set at a low single-digit increase.
ULTA Beauty’s ability to differentiate itself through a superior brand assortment, marketing, and promotional strategies has been highlighted as a key factor in its performance. This has left analysts more positive about the company’s business prospects. However, with ULTA shares currently trading at a price-to-earnings (P/E) multiple of 19 times Citi’s above-consensus fiscal 2025 estimates, the risk/reward is seen as balanced at the current stock price levels.
In other recent news, ULTA Beauty has reported strong financial results for the first quarter of fiscal year 2025. The company exceeded market expectations with an earnings per share (EPS) of $6.70, surpassing the forecasted $5.75, and achieved revenue of $2.85 billion, which was higher than the anticipated $2.79 billion. Following these results, several analyst firms adjusted their outlooks for ULTA Beauty. Raymond (NSE:RYMD) James raised its stock price target to $500, maintaining an Outperform rating, while Morgan Stanley (NYSE:MS) increased its target to $550, keeping an Overweight rating. BofA Securities also lifted its target to $455 but maintained a Neutral rating.
The company’s performance was driven by a 4.5% year-over-year revenue increase, with comparable store sales rising by 2.9%. ULTA Beauty’s management has updated its fiscal year outlook, now expecting comparable store sales to range from flat to a 1.5% increase and adjusted EPS projections to $22.65 to $23.20. Analysts highlighted ULTA’s strategic initiatives, including new brand launches and promotional efforts, as key factors contributing to the company’s success. Despite economic uncertainties, ULTA Beauty’s forward-looking strategy and market positioning have led to positive investor sentiment and confidence in its growth trajectory.
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