Urban Outfitters Poised For A Beat, According To Wunderlich

Wunderlich expects Urban Outfitters, Inc. URBN to report earnings and sales above Street when it announces its third-quarter financial results on November 22, as the company is a key winner of back-to-school season.

The Street expects third-quarter EPS of $0.44 and revenue of $870 million (comp of +1.9 percent).

Solid Analyst Expectations

The brokerage says Urban Outfitters benefited by early adaption of the '80s retro trend and denim, coupled with aggressive inventory reduction and cutting back on discounting.

“When we throw in easy comparisons and the debacle last year at the company's new warehouse, we are upbeat for upside in the quarter,” analyst Eric Beder wrote in a note.

Further, Wunderlich’s analysis shows Google Trends data boding well for third-quarter top-line upside, driven by strong online traffic and demand.

Guidance And Rating

In addition, the analyst expects positive fourth-quarter guidance from the company on easy comparisons and low Street expectations. If weather turns cold, the entire specialty retail sector could be poised for margin expansion.

Consequently, Beder maintains his Buy rating and $40 price target, as Urban Outfitters has been able to take share from lost players such as Abercrombie & Fitch Co. ANF and the shares are trading below 16x his FY 2018 EPS projection.

“As such, we believe URBN has the potential for further margin (and stock multiple) expansion and we continue to recommend the stock in front of earnings,” Beder added.

Shares of Urban Outfitters closed down 3.40 percent on Friday to $37.51.