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Ulta Beauty shares jump on strong 1st qtr results

Ulta Beauty shares soared Wednesday after the beauty products retailer reported stronger-than expected fiscal first-quarter profit and revenue.

THE SPARK: The company formally known as Ulta Salon, Cosmetics & Fragrance Inc. reported after the market closed Tuesday that its profit increased 20 percent to $41.8 million, or 65 cents per share. Revenue shot up 23 percent to $582.7 million for the period ended May 4.

That exceeded the 62 cents per share earnings, and revenue of $576.3 million, that analysts polled by FactSet were anticipating.

THE BIG PICTURE: Ulta's popularity has grown as shoppers look to the retailer for a wider array of beauty brands and products than they might find at a department store or other retailer. The company has added more store-within-store concepts to increase the presence of brands like Clinique and expanded its loyalty program to draw shoppers back regularly.

The company benefited from big gains with its online business, reporting that its e-commerce revenue jumped 70 percent year-over-year.

THE ANALYSIS: Jefferies analyst Randal Konik called the quarter a "beautiful beat" and reiterated his "Buy" rating and $100 price target on the company's stock. The analyst also said that Ulta's outlook is conservative and beatable.

Konik is encouraged by the growth opportunities for Ulta, given its impressive management team and unique positioning, as well as improving margins.

The analyst said in a research note that Ulta is in a strong position for the remainder of the year and that it is making progress in its search for a new CEO, which could serve as another boost in the near-term when that process is complete.

SHARE ACTION: Shares soared $13.86, or 16.5 percent, to $97.99 in midday trading, after spiking as high as $98.63 earlier in the day. Its stock has traded between $75.21 and $103.52 in the past 52 weeks.

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