3 Reasons To Own Express Stock

In a report published Friday, Wedbush analyst Morry Brown maintained an Outperform rating on Express, Inc. EXPR, while raising the price target from $18 to $21.

Express reported its 1Q results ahead of expectations. Analyst Morry Brown enumerated three reasons for owning the company's stock following the 1Q beat as:

1. Opportunity for continued EPS upside, despite a tough retail backdrop - The earnings upside could be mainly boosted by improved inventory control and product execution
2. Potential of multi-year margin tailwind from the outlet business - The company's margin mix could become more favorable, with the shutting down of 50 underperforming doors and pushing higher margin outlet units from about 40 in 2014 to 150 in the coming years
3. Sycamore’s standstill agreement expires on June 15 - This could trigger renewed M&A speculation

"We were impressed with the initial test drop of Express One Eleven merchandise during 1Q15, and management described strong customer response with healthy full price sell through. We view the July rollout to the chain favorably and see the potential for the company to build on the success in One Eleven with the addition of opening price point merchandise in other categories beyond knits," Brown said.

The revenue estimates for 2015 and 2016 have been raised from $2,273 to $2,283 and from $2,356 to $2,439, respectively. The EPS estimates for 2015 and 2016 have been raised from $1.08 to $1.22 and from $1.20 to $1.40, respectively.