Urban Outfitters (URBN - Analyst Report) is a specialty retail company that engages in the retail and wholesale of general consumer products. The company retails women’s and men’s fashion apparel, intimates, footwear, beauty and accessories, home goods, active wear and gear, and electronics that cater to the 18 to 28-year-old age group under the Urban Outfitters brand. Items featured under the Anthropology brand include women’s casual apparel and accessories, intimates, shoes, beauty, home furnishings, and various gifts and decorative items for women aged 28 to 45. Other brands include Free People, Terrain and BHLDN. The company was founded in 1970, employs over 9,000 and is headquartered in Philadelphia, Pa. The stockis Zacks Rank #1 (Strong Buy) and todays Bull of the Day after an impressive earnings beat and multiple price upgrades.
Urban Outfitters has a market cap of $4.3 Billion with a Forward PE of 18. The stock sports Zacks Style Scores of “A” in Value and “B” in both Growth and Momentum. In addition, the company also sits in an industry that is ranked 95 out of 265 (Top 36%) in the Zacks Industry Rank.
Q2 was reported on August 16th with the company seeing $0.66 versus the $0.56 expected. Revenue came above expectations at $890.6 Million verse $889 Million. Total retail sales were up 1% year over year, with Free People flat, Anthropologies down 3% and Urban Outfitter stores up 5%. Gross margins were up to 38.5% verse 36.7% a year ago.
CEO Richard Hayne had some comments on the quarter: “I am pleased to announce our teams delivered record second quarter sales and earnings per share. These results were driven by a positive Retail segment 'comp' and substantial improvement in merchandise margins.”
Last week’s beat was the fifth straight and the seventh over the last ten quarters. Price hasn’t always followed earnings beats, but this quarter the stock surged over 20% in just a few days. This confidence in earnings numbers have investors looking at the long-term story.
Since the company reported estimates have been revised higher across all timeframes. Over the last 7 days, estimates for the current year are up 5%, from $1.94 to $2.04. For fiscal year 2018, estimates have gone 4% higher, from $2.15 to $2.24.
Since earnings, we have seen a number of analysts raising price targets for the stock:
-Evercore raised to Buy from Hold.
-UBS ups Price Target to $36 from $30, reiterates Neutral rating.
-Telsey Advisory Group ups PT to $39 from $31, reiterates Market Perform.
-Mizuho raised PT to $32 from $28, reiterates Neutral rating.
-Stifel raised PT to $40 from $35, reiterates Buy rating.
-Buckingham raised to Buy from Neutral, PT now $42.
Urban outfitters specialty brands have become popular among the younger generation and this is being proven in the numbers. Improving margins on top of record sales will bring investors into the stock on any dips. If the earnings momentum continues into the end of the year, the stock might make a push for 2015 highs of $47.25.
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