What Analysts Have to Say About Urban Outfitters After Earnings

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Urban Outfitters Inc. (NASDAQ: URBN) reported its fiscal third quarter financial results Monday after the markets closed. However, with the harsh environment for most retail stocks, everyone is looking at revenue growth and comparable sales. Unfortunately it does not appear that Urban Outfitters delivered on these. As a result, analysts poured into the stock, updating their ratings and price targets following this miss.

The company posted $0.42 in earnings per share (EPS) on $825.26 million in revenue, which compares to consensus estimates from Thomson Reuters of $0.42 in EPS on $872.00 million in revenue. The same period from the previous year had EPS of $0.35 and revenue of $814.47 million.

Total net sales for the third quarter increased 1% over the same quarter last year, and comparable retail segment net sales, which includes the comparable direct-to-consumer channel, increased 1%.

Credit Suisse adjusted its estimates and lowered its target price to $29 from $38. The firm said:

We are adjusting our fiscal 2016 retail segment comp, revenue and EPS estimates to 1.9%, $3,454 million and $1.72 from 4.2%, $3,545 million and $1.87. Our fiscal 2017 estimates for comp, revenue and EPS go to 3%, $3,669 million and $1.82 from 5.6%, $3,852 million and $2.13. We maintain our Neutral rating, but lower our target price to $29 from $38, reflecting a weighted average of: 1) peer group multiple ($27); 2) a discounted cash flow analysis ($32); and 3) a long-term growth model ($29). Our fiscal 2018 estimates reduce to $2.03 from $2.40.

Wells Fargo has a Market Perform rating for the company and gave its valuation range as $22 to $24, down from the previous $27 to $29. The firm noted that the Urban Outfitters brand has displayed signs of a turnaround, Anthro growth has materially decelerated and it believes that this is too little visibility into top-line trends right now to get constructive on these shares. Despite another positive year at Anthropologie and a solid U.O. business, Wells Fargo remains concerned given upcoming tougher compares, recent product misses at Anthro and low margin visibility.

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Merrill Lynch maintained Buy rating but cut its price objective to $36 from $45. In its report, Merrill Lynch said:

Urban Outfitters reported third quarter EPS of $0.42, 2c above our estimate, with sales weakness offset by SG&A. Total company comps rose 1%, versus our +3%. Urban Outfitters acquired Vetri Family Restaurant group in an effort to innovate and drive traffic. We are lowering our fiscal 2016 EPS estimate by 13c to $1.72 to reflect the disappointing start to the fourth quarter, and cutting our Price Objective to $36. The stock is trading at 11.5x our calendar 2016 EPS estimate. We think Urban Outfitters’ small store base, high ecommerce penetration and unique retail presentation will make it a secular winner in a difficult environment and we retain our Buy rating.

A few other analysts weighed in on Urban Outfitters after it reported earnings:

  • Cantor Fitzgerald downgraded the stock to Hold from Buy with a $22 price target.
  • Stifel has a Buy rating but lowered its price target to $30 from $40.
  • FBR has a Market Perform rating and lowered its price target to $29 from $32.
  • RBC Capital downgraded it to Sector Perform from Outperform and lowered its target to $23 from $32.
  • Wunderlich has a Hold rating but lowered its price target to $22 from $30.
  • Telsey Advisory Group downgraded it to Market Perform from Outperform and lowered the target to $23 from $40.
  • Morgan Stanley has an Equal Weight rating and lowered its price target to $31 from $38.

Shares of Urban Outfitters were trading down over 13% to $19.63 Tuesday morning, with a consensus analyst price target of $37.32 and a 52-week trading range of $22.04 to $47.25.

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