Ulta Beauty Inc (NASDAQ:ULTA) delivered profits for the third quarter that far exceeded market expectations, sending shares of the beauty retailer more than 10% higher in early trade.
Earnings per share of $5.14 topped estimates of $4.55 and were up from $5.07 in the year-ago quarter.
Revenue of $2.53 billion was ahead of estimates of $2.5 billion, attributed to new store contribution which were partially offset by a decline in other revenue. This marked a 1.7% increase year-over-year.
“The Ulta Beauty team delivered better-than-expected sales and profitability reflecting improved sales trends and strong financial discipline,” CEO Dave Kimball commented.
Analysts at UBS awarded the stock a ‘Buy’ rating and raised their price target to $490 from $470, implying upside of almost 25% at the time of writing.
They believe the market has been “too skeptical” about Ulta’s prospects and the company’s Q3 report supports this theory.
“The company showed that its sales are improving and its margins are stabilizing. Plus, it simply maintained its previous Q4 guidance, which we think is conservative,” they wrote.
Ulta also “dispelled some other misconceptions” during the third quarter, notably growing its loyalty program members by 5% which included new and reactivated customers.
“This is not a sign that online retailers are having a disruptive impact on Ulta. Besides, its traffic was positive during the period. This is another sign of how it resonates with consumers, in our view,” they wrote.
In the longer term, the analysts see Ulta as able to provide a line of sight to EPS in the range of $26 to $28.
“We think the stock has more room to run, even after what should be a good response to this print,” they wrote.
Share of Ulta Beauty had added 10.5% at $434 on Friday morning.