What analysts are saying about Gap Inc.

Gap Inc.GPS is expected to report fourth quarter earnings on February 26th, 2015. On Monday the apparel company’s results were previewed by Morgan Stanley and Wedbush.

Morgan Stanley

Analysts Kimberly Greenberger and Amber Turley wrote, “We think in the current promotional environment, compelling product execution is critical. We look for improved full price sales to signal product acceptance. We raise our 4Q EPS estimate to $0.74 (FY $2.82) at the high end of guidance (management provided $0.73-$0.74 4Q EPS guidance) based upon 34.5% gross margin and 23.5% SG&A rate.”

Morgan Stanley reports that key catalysts for the company include improving margin profile resulting from key technology and inventory management investments, along with a strong cash flow that is expected from a mature business.

Gap Inc. is currently rated as Equal-weight with a one year price target of $38.00.

Wedbush

Gap Inc. is currently rated as Neutral with a one year price target of $47.00

Analysts Morry Brown and Taryn Kuida wrote, “While Gap is likely to see some relief against easy comparisons next month, we believe the next data point (2015 guidance) is unlikely to be favorable, as the company is likely to provide a conservative 2015 outlook based on (1) pressure from FX rates, (2) new CEO Peck likely to set an achievable bar for his first year at the helm of the company and (3) Rebekka Bay’s departure likely means the company will not bake in material improvement at Gap until Holiday 2015.”

Fourth quarter guidance offered by Gap Inc. was strong presumably based on healthy holiday sales for its stores along with improved expense control. For upside indications analyst are focusing on stronger margins at Old Navy, lower selling, general, and administrative expenses, along with higher share repurchases.

Gap Inc. closed Monday at $41.10.