Morgan Keegan Raises EPS Estimates On Fred's

Morgan Keegan raised its 2011 EPS estimate on specialty retailer Fred's (Nasdaq: FRED) to 87 cents a share from 84 cents. That compares with guidance of 84-88 cents a share. The research firm is also forecasting fourth-quarter EPS of 26 cents a share compared with guidance of 23-27 cents.Morgan Keegan also raised its 2012 EPS estimate on Fred's to $1.03 from $1. The research firm has an outperform rating and $16 price target on Fred's, which implies substantial upside from where the shares currently trade. “We are encouraged by FRED's ability to expand operating margin ~30 bps to 3% on a 1.5%comp. The Core 5 initiatives continue to gain traction and pharmacy's gross margin is benefiting from the generic drug shift. We expect these trends to continue and reiterate our Outperform rating with shares trading at 4.9x our NTM EV/EBITDA estimate (3 yr TTMrange: 5x-11x),” Morgan Keegan said in a note to clients.