Consumer Discretionary

Lululemon Athletica (LULU) faces a mixed outlook among investors amid an expected “soft” Q1 US outlook countered by “robust international momentum,” UBS Securities said Monday in a report. “China’s trends looks robust, and soft US checks over the last three to four quarters have not resulted in weak earnings or guidance,” UBS said. “We see a very slightly negative upside/downside skew.” UBS said its data shows China momentum continuing, while industry web traffic indicates a deceleration for Lululemon. “Whatever plays out, we, we sense a large group of investors will be surprised,” UBS said. The investment firm kept its neutral rating on Lululemon and maintained the price target at $525. Results for Q4 and the full year are expected Thursday.

Lululemon Athletica (LULU) has a slight negative bias heading into the March 21 fourth-quarter print with solid holiday trends previously discussed by management, but soft first-quarter sales could lead to volatility after the event, UBS said. The brokerage is guiding for revenue growth of about 16% to $3.22 billion in the fourth quarter, slightly above the consensus view of $3.19 billion. Its adjusted earnings per share target of $5.02 is also above the Street’s view of $5, Monday’s emailed note showed. “We anticipate that the international region will be the primary driver of sales growth as it benefits from ongoing unit expansion and recovery of the Greater China region,” UBS analysts including Jay Sole and Mauricio Serna wrote. Lululemon demand likely remained robust in the quarter that included the key holiday shopping period, they said, with management commentary previously suggesting such a scenario. UBS is modeling sales growth of 10%