Market Overview

Morgan Stanley On Children's Place: 'The Kids Are Just Fine'

Share:
Morgan Stanley On Children's Place: 'The Kids Are Just Fine'

Morgan Stanley maintains its Overweight rating on Childrens Place Inc (NASDAQ: PLCE) after the company reported better-than-expected results for the first quarter.

The company's $1.32 first quarter EPS grew 59 percent year-over-year and "handily beat the Street's $1.04 estimate as well as the market's likely lower view." The retailer delivered a 5.1 percent comp with 170 bps of gross margin improvement.

"We also believe the strong, high-quality 1Q beat shows PLCE's self-help story is fully intact. This, in our view, causes the P/E to recover some of the 3 turns it lost over the last month and the stock's 8.8 percent free cash flow yield to head lower," analyst Jay Sole wrote.

Related Link: Children's Place Pops 9% On Q1 Results And Upbeat Forecast

The company also raised FY16 EPS guidance to $4.17–$4.27 from $4.00–$4.10 (the Street: $4.09), and the analyst said the outlook is conservative. The company maintained its positive low-single-digit comp guide.

"PLCE is lapping a very easy-3.5 percent comp in 2Q. Assuming PLCE was comping 1 percent on a two-year basis exiting 1Q, this implies it can achieve a 4.5 percent 2Q comp even if the environment remains weak," Sole highlighted.

Meanwhile, Children's Place's second-quarter guide calls for only a 1–2 percent comp increase.

Sole noted that the bottom line would benefit from gross margin improvements and growth in international and wholesale businesses.

"[W]e think there is more 2Q gross margin upside than the Street is forecasting and guidance implies. The Street is modeling roughly 100 bps of GM expansion, but if the two-year trend holds, PLCE could deliver 285bps. PLCE's FY16 gross margin guidance as of last quarter was a +80–90bps change," Sole added.

Children's Place closed Tuesday's normal trading session up 4.13 percent at $71.05; shortly after the closing bell, the stock was up by a few cents in after-hours trading.

Latest Ratings for PLCE

DateFirmActionFromTo
Jun 2020B of A SecuritiesMaintainsUnderperform
Jun 2020CitigroupMaintainsNeutral
May 2020CitigroupMaintainsNeutral

View More Analyst Ratings for PLCE
View the Latest Analyst Ratings

 

Related Articles (PLCE)

View Comments and Join the Discussion!

Posted-In: Analyst Color Long Ideas News Price Target Reiteration Analyst Ratings Movers Trading Ideas Best of Benzinga

Latest Ratings

StockFirmActionPT
ASMLWells FargoMaintains430.0
COSTOppenheimerMaintains355.0
SAPRBC CapitalMaintains150.0
BYNDBernsteinMaintains133.0
CMGCredit SuisseMaintains1,150.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com