Why Are Buy Side Analysts Looking For Lululemon To Beat Wall Street Estimates?

| About: Lululemon Athletica (LULU)

Lululemon (NASDAQ:LULU) is expected to report FQ2 2014 earnings on Thursday 9/12 before the open. The information below is derived from data submitted to the Estimize platform by a set of Buy Side and Independent analyst contributors.

While the stock took quite a tumble after last quarter’s earnings due to the departure of Lululemon’s CEO, the company raised guidance and has seen expectations increase throughout the quarter.

The current Wall Street consensus expectation is for LULU to report 35 cents EPS and $342.86M Revenue while the current Estimize consensus from 18 Buy Side and Independent contributing analysts is 37 cents EPS and $343.79M Revenue. The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. Compared with previous quarters, we don’t see a dramatic change in sentiment here.

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Over the past 4 months the Wall Street consensus trend for EPS has been positive, moving from 32 cents to 35 cents while the the Wall Street consensus trend for Revenue has been positive, moving from $331.34M to $342.86M. For many stocks, the trend in consensus is highly correlated to equity direction.

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Over the previous eight quarters, LULU has beaten the Wall Street consensus for EPS all eight times while missing the Wall Street Revenue consensus only once. Over the past six quarters LULU has beaten the Wall Street consensus for EPS four times while beating the Wall Street Revenue consensus five times.

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The distribution of estimates published by analysts on Estimize range from 29 cents to 41 cents EPS and $335M to $358M Revenues. The range of estimates this quarter is in line with the normal size of the distribution historically. The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already, a wider distribution signaling the potential for greater volatility post earnings.

The analyst with the highest estimate confidence rating this quarter is Dan Miller, who projects 38 cents EPS and $345M Revenue.

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Given that LULU has historically exceeded the Wall Street consensus, and the Estimize consensus for LULU has historically been more accurate than Wall Street, and is once again more optimistic, we expect Lululemon to report a solid quarter. The big question of the day will be what move the board makes regarding a new CEO.