Lululemon Athletica (LULU) may report Q4 earnings per share above expectations, supported by stronger sales, though Morgan Stanley anticipates management will take a cautious approach to full-year guidance.

The company raised its Q4 guidance in January, forecasting earnings per share of $5.81 to $5.85, up from a prior range of $5.56 to $5.64, and revenue of $3.56 billion to $3.58 billion, above its previous forecast of $3.48 billion to $3.51 billion.

Morgan Stanley said in a note Wednesday that investor sentiment around Lululemon has weakened in recent weeks, with confidence in a first-half Americas revenue inflection fading. The firm believes this has lowered the bar heading into the Q4 report.

For Q1, Morgan Stanley expects sales guidance to come in slightly below Street estimates but sees earnings per share as more resilient, supported by potential cost controls and share repurchases.

Full-year sales guidance is expected to be largely in line with expectations, while earnings per share could be guided slightly below consensus, leaving room for potential outperformance, according to the note.

Lululemon is scheduled to report Q4 results on March 27.

Morgan Stanley maintained an overweight rating on the stock but lowered its price target to $411 from $420.

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