The market expects Ulta Beauty (ULTA) to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended January 2025. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released ...

Whenever Wall Street authoritative figures, such as a large institution or individual investor, decide to shift a view on a specific stock or industry, retail traders can significantly benefit from attempting to reverse engineer the reasoning behind such a decision and shift. Today, this signal comes through Warren Buffett, the legendary value investor who has been the center of attention after a few months of being relatively inactive. The latest headlines for Buffett include his choice to sell out some co ...

Group 1 - The analyst has extensive experience in investment banking, focusing on both public and private market opportunities, and has a strong background in consumer stocks [1] - The analyst emphasizes the importance of competitive advantages and growth prospects in investment decisions, influenced by notable figures like Ben Graham and Warren Buffett [1] - The analyst prefers a long-only investment strategy, finding shorting stocks to be challenging and less reliable [1] Group 2 - The analyst holds both CFA and CAIA charters, indicating a high level of professional qualification in investment analysis [1] - The analyst has experience using research tools such as Bloomberg and Factset, enhancing their ability to conduct thorough market analysis [1] - The analyst's approach includes using discounted cash flow (DCF) models as a supportive tool rather than the sole basis for investment recommendations [1]

Core Viewpoint - The beauty sector is experiencing significant declines in 2025, with Ulta Beauty, Coty, and e.l.f. Beauty all facing steep losses, but Ulta Beauty is positioned for a potential rebound due to its diverse product lineup and strong customer loyalty [12][13]. Ulta Beauty - Ulta Beauty ended 2024 down 11.24% and is currently down 16.05% year-to-date (YTD) [1] - The company reported fiscal Q3 2025 earnings per share (EPS) of $5.14, beating consensus estimates by $0.61, with revenues rising 1.7% year-over-year (YoY) to $2.53 billion [4] - Ulta Beauty issued an upside guidance for fiscal 2025 with EPS expected between $23.20 to $23.75, up from previous forecasts, and revenues projected between $11.1 billion to $11.2 billion [5] - The compound annual growth rate (CAGR) for Ulta Beauty has been 17% since 2010, with skincare being the strongest growth driver at a CAGR of 19.3% [3] Coty - Coty closed 2024 with a 43.96% loss and is down 19.83% YTD [1] - The company reported fiscal Q2 2025 EPS of $0.11, missing consensus estimates by $0.10, with revenues falling 3.3% YoY to $1.67 billion [7] - Coty faced challenges in China and other markets, impacting its sales of color cosmetics, although its Prestige Fragrances portfolio continued to perform well [6][8] e.l.f. Beauty - e.l.f. Beauty has seen a significant decline, with a 41.86% drop YTD as of February 14, 2025, and finished 2024 down 13.02% [1][2] - The company reported fiscal Q3 2025 EPS of $0.74, missing estimates by $0.02, but revenues surged 31.2% YoY to $355.3 million [11] - e.l.f. Beauty lowered its guidance for fiscal 2025 EPS to a range of $3.27 to $3.32, down from earlier estimates, with expected revenues between $1.300 billion to $1.310 billion [12]

Core Insights - The article discusses the investment position of Parkev Tatevosian, CFA, and his affiliation with The Motley Fool, highlighting the potential for compensation through promotions [1] Company Insights - The Motley Fool has positions in and recommends Ulta Beauty, indicating a positive outlook on the company's stock [1]

Company Performance - Ulta Beauty (ULTA) closed at $412.15, reflecting a -1.52% change from the previous session, underperforming the S&P 500's daily loss of 0.51% [1] - Over the past month, Ulta Beauty shares have decreased by 2.48%, lagging behind the Retail-Wholesale sector's gain of 7.41% and the S&P 500's gain of 2.87% [1] Upcoming Earnings - The upcoming earnings release is expected to show an EPS of $7.12, which represents an 11.88% decline compared to the same quarter last year [2] - Revenue is anticipated to be $3.46 billion, indicating a 2.6% decrease from the same quarter of the previous year [2] Full Year Projections - For the full year, earnings are projected at $23.99 per share, reflecting a -7.84% change from the prior year, while revenue is expected to be $11.27 billion, showing a +0.56% change [3] Analyst Forecasts - Recent revisions to analyst forecasts for Ulta Beauty are important, as upward revisions indicate analysts' positive outlook on the company's business operations and profit generation capabilities [4] Zacks Rank and Valuation - The Zacks Rank system currently rates Ulta Beauty at 2 (Buy), with a historical average annual gain of +25% for 1 rated stocks since 1988 [6] - Ulta Beauty has a Forward P/E ratio of 17.44, which is a premium compared to its industry's Forward P/E of 15.21 [6] PEG Ratio and Industry Ranking - The company has a PEG ratio of 1, compared to the Retail - Miscellaneous industry's average PEG ratio of 1.42 [7] - The Retail - Miscellaneous industry, part of the Retail-Wholesale sector, holds a Zacks Industry Rank of 15, placing it in the top 6% of over 250 industries [7][8]

Core Insights - Ulta Beauty, Inc. is the largest specialty beauty retailer in the United States, offering a range of products including fragrances, skincare, hair care, and salon services [1] - The company has recently appointed a new CEO, indicating potential strategic changes that may impact its future performance [1] - The focus on value investing highlights the importance of identifying companies with long-term growth potential, particularly those undergoing strategic changes that can correct stock mispricing [1] Company Strategy - The investment approach emphasizes analyzing company strategies and competitive advantages to assess future prospects [1] - Companies undergoing strategic changes are viewed as presenting the highest return potential due to existing misconceptions and uncertainties surrounding their stock [1] Market Position - Ulta Beauty's position as a leading retailer in the beauty sector suggests a strong competitive advantage, which may be leveraged under new leadership [1]

Core Insights - Milk Makeup, a clean beauty brand, is expanding its presence by partnering with Ulta Beauty, making its products available in over 600 stores and online starting this spring [1][4] - The brand has seen significant growth, becoming a top 20 EMV makeup brand globally with a 75% increase in EMV last year [2] - Milk Makeup's product range includes over 150 items priced between $20 and $52, emphasizing inclusivity and innovative formulations [3][4] Company Overview - Milk Makeup was founded in New York City and is known for its commitment to clean, vegan, and cruelty-free products, focusing on creativity and self-expression [5][6] - The brand aims to unlock creativity for all individuals, emphasizing that beauty is about personal expression rather than just makeup application [6] Industry Context - The partnership with Ulta Beauty aligns with the growing consumer preference for brands that prioritize values such as inclusivity and community [3] - Ulta Beauty's Senior Vice President highlighted Milk Makeup's innovative approach and its role in enhancing the beauty discovery experience for consumers [4] Strategic Vision - Waldencast plc, the parent company of Milk Makeup, aims to build a leading beauty and wellness platform by developing and scaling purpose-driven brands [7][8] - The operational scale and expertise provided by Waldencast are expected to enhance Milk Makeup's market responsiveness and growth potential [8]

Core Points - A California mother, Michelle Mack, pleaded guilty to running an organized retail crime ring that stole millions in beauty products from retailers like Ulta Beauty and Sephora to resell on Amazon [1][9] - Mack has been sentenced to five years in prison and ordered to pay $3 million in restitution to the affected retailers [2][11] - The crime ring reportedly led to an estimated $8 million in stolen beauty products, spanning at least a dozen states [9][10] Retail Impact - The restitution amount of $3 million is relatively small compared to the annual net income of retailers like Ulta, but it still represents a financial recovery for the companies involved [5] - Ulta Beauty expressed pride in collaborating with law enforcement on the investigation, highlighting the importance of partnerships in combating organized retail crime [6] - The National Retail Federation noted that restitution amounts for theft have only recently started reaching millions, indicating a growing trend in organized retail crime [7] Crime Dynamics - Mack's operation involved recruiting young women to steal products, which were then sold at a fraction of their retail price on her Amazon storefront [10] - The investigation revealed the sophisticated nature of retail crime rings and their use of online marketplaces to sell stolen goods [10] - The judicial process for restitution is complex, and it does not guarantee that victims will receive full compensation for their losses [9][8]

Core Viewpoint - Ulta Beauty is positioned as a strong investment opportunity due to its resilient business model, significant market presence, and attractive valuation metrics, suggesting potential for market-beating returns [1][6][10]. Company Overview - Ulta Beauty operates 1,437 stores in the U.S. as of the end of fiscal Q3 2024, offering a wide range of beauty brands both in-store and online, including partnerships with retailers like Target [2]. - The company combines physical retail with digital offerings, providing services such as full-service hair salons that enhance customer experience [3]. Customer Engagement - A substantial portion of Ulta Beauty's sales is driven by its loyalty program, which has over 44 million members and grew by 5% year-over-year in Q3 [4][3]. - The loyalty program contributes to the company's resilient market share, as it fosters repeat purchases and customer retention [4]. Digital Growth and Revenue Streams - Ulta Beauty is expanding its digital channels, similar to Walmart, by leveraging retail media to market products and generate advertising revenue [5]. - The company anticipates net sales exceeding $11 billion for 2024, with a stable operating margin projected at around 13% [6][7]. Profitability and Shareholder Returns - With expected annual sales of $11 billion and a 13% operating margin, Ulta Beauty could generate over $1.4 billion in annual operating income [8]. - The company has no long-term debt and minimal capital expenditures, allowing for a significant portion of profits to be returned to shareholders through stock buybacks, which have reduced the outstanding share count by nearly 18% over the past five years [9]. Valuation Metrics - Ulta Beauty's current price-to-earnings (P/E) ratio is 16, which is over 40% cheaper than the S&P 500 average of about 29, indicating it may be undervalued [10]. - The potential for stock price appreciation exists, but even if it remains a value stock, the company can enhance shareholder value through aggressive buybacks [11][12]. Future Outlook - The company is expected to achieve a 10% annual return under a scenario of zero growth, with potential for higher returns if growth is realized, particularly through its retail media network [13].