Goldman Sachs Reinstates Neutral Rating For Jones Apparel Group (JNY)

The Goldman Sachs Group analysts Benjamin H. Rowbotham, Adrianne Shapira, Morry Brown and Scott Kaufman-Ross removed the Not Rated designation for Jones Apparel Group Inc (NYSE: JNY) and gave the stock a Neutral rating, with a price target of $19 per share.

The analysts said that after a sharp drop in the stock prices of Jones Apparel Group and its peers, they thought that the risk/reward of owning the stock was much improved.

The Goldman Sachs Group analysts wrote, "We have removed the NR designation from JNY shares. We have a Neutral rating and a price target $19. Following the completion of Jones’ acquisition of Stuart Weitzman (SW) we continue to believe Jones will benefit from further portfolio diversification toward higher end, affordable luxury labels versus their typical mid-tier forte. Pending the firm’s bond issuance (target $200 mn), we believe SW will provide +$0.03-$0.05 of EPS accretion annually. That said, we do see higher sourcing costs as a burgeoning headwind for 2011 as indicated by recent guidance from Polo (calendar 1Q11 gross margin guided down several hundred basis points in part due to sourcing pressure)."