Most people have ditched their Covid masks, and that’s good news for cosmetics retailers like Ulta Beauty (ULTA), which reports earnings on Thursday. UTLA stock popped Wednesday.


For nearly two years, people religiously wore masks — and less makeup — to protect themselves and help stop the spread of Covid-19. During that time, Ulta Beauty, like other cosmetics retailers struggled to sell products. Because what’s the point of wearing lipstick behind a mask?

As a result, Ulta Beauty earnings and revenue tumbled. ULTA shares fell as low as 124. But by the first quarter of 2021, Ulta’s outlook turned rosier. The Bolingbrook, Ill-based company has posted four straight quarters of earnings growth, three of them triple-digit growth. Ulta’s sales have also charged higher in the last four quarters. And ULTA stock bounced back to a new high of 438.63 intraday on April 21. Shares have since pulled back to around 354 amid an overall market downturn.

Retailers have been hit especially hard recently, with consumers spending less as stimulus money dries up. Rising inflation and continued supply-chain issues are also crimping profits among even bargain retailers like Target (TGT) and Walmart (WMT).

Nevertheless, D.A. Davidson analyst Michael Baker says Ulta should fare better than most.

“One product area that stood out was beauty, even in TGT’s weak results,” he wrote in a May 22 note. 

Baker says Ulta is “benefiting from the reopening trade.” He concedes that margins will be down this year, but adds that that’s already baked into estimates.

Ulta Beauty Earnings

Estimates: FactSet analysts expect Ulta Beauty earnings of $4.46 a share, a 9.6% increase from a year earlier. Sales are seen rising 9.5% to $2.112 billion. Growth rates are slowing as year-over-year comparisons become more difficult

Baker says to look for management to update investors on makeup trends, such as any trade down to more entry-level products or private label.

Results: Check back late Thursday.

ULTA Stock

Shares jumped 3.5% to 354.07 on the stock market today, after falling intraday Tuesday to the lowest in nearly 10 months. ULTA stock broke out of a cup-with-handle base on April 11, and raced all the way to a 52-week high of 438.63 before tumbling 19%, according to MarketSmith chart analysis. Shares gapped down nearly 11% on May 18, as part of the Target-led retail meltdown.

Ulta stock is now trading below its 50-day and 200-day lines.

The company’s relative strength line also dived. Ulta Beauty’s RS Rating is a 67 out of a best-possible 99, while its EPS Rating is 88.

With a Composite Rating of 82, ULTA stock is ranked second in IBD’s Retail Specialty industry group. ULTA stock has a D- Accumulation/Distribution Rating, which demonstrates moderate selling among institutional buyers.

Retail stocks with significant cosmetics sales Target jumped 4%, while Walmart edged lower.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.


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