2 Analysts Break Down Ulta Beauty's Q4 Earnings, CEO Transition

Shares of Ulta Beauty Inc (NASDAQ: ULTA) were lower Friday after the beauty retailer announced Thursday afternoon its fourth-quarter results and a CEO transition.

The Ulta Beauty Analysts: Credit Suisse analyst Michael Binetti maintains an Outperform rating on Ulta Beauty's stock with an unchanged $350 price target.

Raymond James analyst Joseph Altobello maintains a Market Perform rating on Ulta's stock with no price target.

Credit Suisse — COVID-19 Recovery Play: Ulta's fourth-quarter EPS of $3.41 was "well above" Street estimates of $2.34, as same-store sales of negative 4.8% also beat estimates of down 11%, Binetti wrote in a note.

Gross margins also beat expectations at 35.1% versus 33.1% driven by merchandise margin improvements.

Shares of Ulta are impacted by a guidance miss that lowers near-term visibility along with the announcement that Ulta President Davie Kimbell will succeed Mary Dillon as CEO, the analyst wrote.

However, there are plenty of reasons to believe Ulta's top and bottom lines will outperform as COVID-19 pandemic lockdowns and restrictions ease in the coming months.

Related Link: Ulta Beauty Halts Teen Vogue Ad Campaign Amid Uproar Over New Editor's Racist Tweets From College Year

Raymond Jones — Strong Quarter Overshadowed By Headwinds: Ulta "easily" beat expectations in the fourth quarter and the beauty retailer even gained market share in most categories, Altobello wrote in a note. But management's fiscal 2021 EPS outlook of $8.85 to $9.30 was "well below" the Street's estimate of $10.52.

In addition, Ulta's sales outlook of $7.2 billion to $7.3 billion represents a decrease from 2019 levels, despite the addition of 50 new stores over the past year.

The revenue guidance implies a year-over-year decline in online sales and the lower sales base will result in operating margins dipping from 12.2% in 2019 to an estimated 9%.

The CEO transition announcement was also a surprise given Dillon's "very successful" run as CEO for eight years, the analyst wrote. She oversaw Ulta expanding its valuation three-fold and doubled its store fleet.

"That said, Mr. Kimbell has developed a reputation as a strong operator and is well-known to the Street, and with Ms. Dillon staying on the Board we suspect the transition will be fairly smooth," Altobello wrote.

Related Link: Ulta Beauty Vs. Sephora: Which Beauty Giant Will Recover Faster, Post-Pandemic?

ULTA Price Action: Shares of Ulta Beauty were trading lower by 8% Friday afternoon at $319.84.

(Photo: Mike Kalasnik via Flickr)