Foot Locker Is One Of The More Attractive Stocks Out There, Morgan Stanley Says

• Foot Locker, Inc.'s FL share price has declined 3.7 percent despite the company's 2Q EPS beating expectations.
• Morgan Stanley's Jay Sole maintained an Equal-weight rating on Foot Locker, while raising the price target to $78.
• Sole expects the market's response to the 2Q15 results to be similar to that to the company's 3Q14 results, when the stock decline before rallying.

Following Foot Locker reporting its 3Q14 results, its share price fell 4.3 percent, only to rally 17 percent over the next six months. With the share price having declined 3.7 percent after the announcement of higher than expected 2Q earnings, Sole expects to see a similar response among investors.

With 13 percent upside and a 2:1 risk/reward profile, Sole also believes that Foot Locker offers an attractive investment option.

The company reported strong 2Q results, with the European business and apparel sales improving, Lady Foot Locker and SIX:02 continuing to make progress and a 19 percent year on year increase in eCommerce sales.

The EPS estimates for FY15 and FY16 have been raised, along with the 3Q SSS and EPS estimate, based on the guidance and commentary given by Foot Locker.

The long-term outlook for the company remains unchanged. Sole believes that Foot Locker is "the retailer best positioned to benefit from the likely long-lasting health & wellness/athleisure trend."

"Some view FL's peak sales productivity and margins as a sign of a cyclical top. However, we view the trend as secular, not cyclical and think FL will deliver consistent EPS growth," the Morgan Stanley report added.