Is Ulta A Buy Before Earnings? Here's The Evidence

• Shares of Ulta Salon, Cosmetics & Fragrance, Inc. ULTA have appreciated 35.33 percent year-to-date, reaching a high of $174.08 on November 10.
• JP Morgan’s Christopher Horvers has maintained an Overweight rating on the company, while raising the price target from $180 to $215.
• Horvers expects the company to report its 3Q15 EPS and comp in line with the guidance but marginally below the consensus, when it announces its Q3 earnings after market close on December 3.

Analyst Christopher Horvers mentioned that he remained positive “on the long-term prospects for the company to double-to-triple its current market share.”

Horvers also expressed optimism regarding the stock, prior to the earnings release, given the sequential acceleration in sales during Q3, compared to the consensus forecast implying a sequential deceleration of 50 bps in Ulta Salon’s comps.

In addition, Q3 is expected to be “another strong quarter” for online traffic growth, ahead of the competitors, along with “consistent momentum in cosmetic sales in the food, drug, and mass channels, which ULTA has consistently outperformed.”

According to the JP Morgan report, the Street has “accurately captured the step up in depreciation pressure and see potential margin upside as ULTA laps an incentive comp accrual from last year.”