Market Overview

Why 2 Urban Outfitters Analysts Are Sidelined After Retailer's Q2 Sales Beat

Share:
Why 2 Urban Outfitters Analysts Are Sidelined After Retailer's Q2 Sales Beat

Specialty fashion retailer Urban Outfitters, Inc. (NASDAQ: URBN) reported second-quarter results Tuesday that were highlighted by a surprise profit, but two Street analysts are staying on the fence due to the stock's valuation. 

The Urban Outfitters Analysts

Baird analyst Mark Altschwager maintains a Neutral rating on Urban Outfitters with a price target lifted from $21 to $25.

Citi analyst Paul Lejuez maintains a Neutral rating with a price target lifted from $20 to $24.

Baird Says Retailer Has Balanced Near-Term Risk

Baird's second-quarter report was notably better than expected, as EPS of 35 cents beat expectations of a 40-cent-per-share loss, Altschwager said in a note. Free cash flow was also better than expected at $146 million versus estimates of negative $29 million, while the EBIT margin also beat estimates at 8.6% versus negative 8.6%, the analyst said. 

Digital demand grew by a double-digit percentage. Sores were open for around 66% of the quarter, while conversion reached an all-time high despite fewer promotions, he said. 

Free People reported 11% year-over-year comp growth at open stores, while the core Urban brand's comps were down 8%. Anthropologie was the worst performer, as retail comp sales were down 25%.

The improving trends seen in the quarter represent a longer-term bullish outlook, but the near-term risk-reward profile for Urban Outfitters is "balanced" at current levels, according to Baird.

Citi's Urban Outfitters Valuation Concerns

Urban Outfitters reported a top-and-bottom-line beat, as Free People and the core Urban Outfitters brand are outperforming expectations, Lejuez said in a note.

The retailer said it expects sales to be down by a better-than-expected mid-single digit in the third quarter, and said its inventory is "very lean," the analyst said. 

This will likely contribute to a "solid recovery" throughout the back half of 2020, especially as the company isn't seeing back-to-school pressures, he said. 

Shares of Urban Outfitters are trading at six times EV/EBITDA on 2021 estimates, and this implies a "balanced" risk-reward profile, according to Citi. 

URBN Price Action: Shares of Urban Outfitters were trading higher by 18.68% at $24.68 at last check Wednesday. 

Related Links:

Benzinga's Top Upgrades, Downgrades For August 26, 2020

Urban Outfitters: Q2 Earnings Insights

Photo by Philafrenzy via Wikimedia

Latest Ratings for URBN

DateFirmActionFromTo
Oct 2020BarclaysUpgradesEqual-WeightOverweight
Aug 2020UBSMaintainsNeutral
Aug 2020Morgan StanleyMaintainsOverweight

View More Analyst Ratings for URBN
View the Latest Analyst Ratings

 

Related Articles (URBN)

View Comments and Join the Discussion!

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

Latest Ratings

StockFirmActionPT
MSFTStifelMaintains245.0
TXRHJP MorganMaintains67.0
SBUXJP MorganMaintains82.0
MCDJP MorganMaintains220.0
CMGJP MorganMaintains1,115.0
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