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Bull of the Day: Urban Outfitters (URBN)

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Shares of Urban Outfitters, Inc. (URBN - Free Report) have surged roughly 30% over the past six months, which crushes its industry’s 10% gain. Luckily for investors who might have missed out on this ride, the lifestyle and clothing retailer that also owns Anthropologie and Free People looks poised to continue to climb.

Q2 Overview

Urban was able to stand out last week amid a fantastic second quarter for retailers that saw industry giants Walmart (WMT - Free Report) and Target (TGT - Free Report) post impressive quarterly financial results. The Philadelphia-based company reported Q2 earnings that soared 90% from $0.44 per share in the year-ago period to hit $0.84 share, which also topped our $0.76 per share Zacks Consensus Estimate.

Urban not only delivered better-than-expected earnings results for the fifth straight quarter, the trendy retailer also saw its quarterly revenues jump 13.7% to a record $992.5 million—also easily surpassing our $977 million estimate. “All three brands delivered double-digit retail segment ‘comp’ sales and lower markdown rates to drive these results,” CEO Richard Hayne said in a statement. 

Price Movement

Investors will notice that shares of URBN have gone on a pretty wild ride over the last five years. Yet, Urban’s stock price has skyrocketed roughly 120% over the last year on the back of positive momentum driven by its ability to adapt more quickly to new styles, some of which happen to fall directly in its wheelhouse—including a wave of late 80's and early 90's trends.

Shares of URBN have cooled down since the start of 2018, but are still up roughly 30%, which outpaces the S&P 500’s 9% jump. Plus, Urban stock was trading roughly $7 below its 52-week high of $52.50 as of Tuesday’s close at $45.41 per share.

 

Outlook & Earnings Revisions

Looking ahead, Urban’s growth story appears to be far from over. The company’s third-quarter revenues are projected to pop by 8.6% to reach $969.74 million, based on our current Zacks Consensus Estimate. Meanwhile, the company’s current fiscal year revenues are expected to hit $3.96 billion, which would mark a 9.6% jump.

At the other end of the income statement, URBN’s adjusted quarterly earnings are projected to soar by nearly 54% to reach $0.63 per share. The retailer’s fiscal year EPS figure is expected to expand by over 59% to touch $2.66.

Investors should also be happy to note that Urban has received seven upward earnings estimate revisions for its third quarter over the last seven days, against zero downward changes. More importantly, UBRN has seen eight full-year earnings revisions and seven for its following fiscal year during this same time period, with 100% agreement to the upside.

Bottom Line

Urban is currently a Zacks Rank #1 (Strong Buy) due, in large part, to its recent wave of positive earnings revision activity. This shows investors that analysts are more positive about the company’s future earnings outlook than they were before URBN reported its impressive second-quarter results. The company also currently sports an “A” grade for Momentum in our Style Scores system.

Lastly, URBN stock is currently trading at 16.1X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to the S&P’s 17.6X and the 17.2X average currently held by its peer group—which includes the likes of Abercrombie & Fitch Co. (ANF - Free Report) , American Eagle Outfitters (AEO - Free Report) , and Foot Locker (FL - Free Report) .

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