RBC Says Chico's FAS Is An Under-Owned Name
Chico's FAS, Inc. (NYSE: CHS) reported a Q2 beat, with sales and margins ahead of expectations. The company represents an “under-owned name” with low expectations, RBC Capital Markets’ Brian Tunick said in a report. He reiterated an Outperform rating on the company, while raising the price target from $13 to $14.
Chico’s FAS reported its adjusted EPS at $0.25, higher than the consensus estimate of $0.22. Sales declined 3.6 percent to $636 million, but came in ahead of the Street’s $632 million. The company’s EBIT margin came in at 8.5 percent, down from last year’s 9.2 percent, but beating the Street’s 7.4 percent, analyst Tunick mentioned.
Cushion For Meeting EBIT Margin Target
Chico’s FAS is creating a cost-cutting cushion to achieve its low-double-digit EBIT margin target, versus the 6.6 percent achieved in 2015, Tunick noted. CEO Broader announced another $25 million in cost savings, apart from the $65-$85 million announced in the prior quarter.
The EPS estimate for 2016 has been raised from $0.66 to $0.68. The analyst commented that Chico’s FAS was an “under-owned name w/lower expectations into 2Q16 print.” He enumerated the catalysts for the company as:
- Lower expectations for 2H16 comp and GM
- Cleaner inventory
- Self-help for 2H16-2017 margin
- September 28 analyst day
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Latest Ratings for CHS
|Nov 2016||MKM Partners||Maintains||Neutral|
|Nov 2016||Deutsche Bank||Maintains||Hold|
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