Can Lululemon (LULU) sustain its streak of earnings surprises?

Have you been looking for stocks that could be well positioned to maintain their strong performance streak in the upcoming report? Lululemon (LULU), which belongs to the Zacks Textile – Apparel industry, is worth considering.

This sportswear maker has a strong history of achieving top earnings estimates, especially considering its two previous reports. The company boasts an average surprise for the last two quarters of 32.23%.

Lululemon was expected to report earnings of $0.49 per share for the most recent quarter, but instead reported earnings of $0.71 per share, representing a surprise of 44.90%. The consensus estimate for the prior quarter was $0.46 per share when it actually delivered $0.55 per share, representing a surprise of 19.57%.

Price and EPS surprise

With this earnings history in mind, Lululemon’s latest estimates are getting higher. In fact, the company’s Zacks Earnings ESP (expected surprise) is positive, which is a great sign of earnings growth, especially when you combine this metric with a nice Zacks Rank.

Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better produce a positive surprise nearly 70% of the time. In other words, if you have 10 stocks in this combination, the number of stocks that beat the consensus could be as high as seven.

The Zacks Earnings ESP compares the Most Accurate Estimates to the Zacks Consensus Estimates for the quarter; The Most Accurate Estimate is the Zacks Consensus version, which is defined in terms of change. The idea is that analysts reviewing their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other consensus participants had previously predicted.

Currently, Lululemon’s ESP is +4.96%, which suggests analysts have become optimistic about its near-term earnings potential. When you combine the positive Earnings ESP with the stock’s Zacks Rank #1 (Strong Buy), it shows that another rally is likely just around the corner. The company’s next earnings report is expected to be released on December 5, 2018.

When earnings ESP turns negative, investors should remember that this will reduce the predictive power of this metric. However, a negative value does not indicate a company’s lack of profits.

Many companies end up beating consensus EPS estimates, but that may not be the only basis for their stock’s rise. On the other hand, some stocks may hold even if they fall short of the consensus price.

For this reason, it is very important to check a company’s earnings ESP before its quarterly release to increase the chances of success. Use our Earnings ESP filter to find the best stocks to buy or sell before they report.

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Lululemon Athletica Inc. (LULU): Free Stock Analysis Report

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