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The Street's Reaction To Urban Outfitters: From Trade War 'Winner' To 'Bottom Of The Pack'

Jayson Derrick

Urban Outfitters, Inc. (NASDAQ: URBN) reported a second-quarter earnings beat and 5% comp growth at the core Urban Outfitters brand while Free People and Anthropologie comps were up 6% and 3%, respectively.

Here is a summary of how some of the Street's top analysts reacted to the print.

Wells Fargo: Key Takeaways

Urban Outfitters' second-quarter includes a "rollercoaster of data points," Wells Fargo analyst Ike Boruchow wrote in a note. The four more notable takeaways include: EPS came in better than expected but comps fell short of estimates as SG&A came in lower than modeled, a "lackluster" print was followed up with encouraging quarter-to-date commentary form management, improving trends could be the result of promotional activity as inventory levels rose 17% and SG&A growth was modeled to be higher by up to 5% amid investments in stores.

Wells Fargo maintains at Market Perform lowers price target from $28 to $25.

See Also: Wall Street Analysts Explain The Urban Outfitters Earnings Sell-Off

Bank of America: Business Is Turning

Urban Outfitters' management signaled third-quarter to-date comps are positive across all three core brands, Bank of America analyst Lorraine Hutchinson wrote in a note. Meanwhile, wholesale sales declines are likely to continue into the third quarter but management is optimistic trends can improve in the fourth quarter.

In addition, management expects to see 10 to 15 basis points of pressure to margins in the back half of 2019 from tariffs, the analyst wrote. However, Urban Outfitters' brands boast pricing power and the stock could prove to be a "relative winner if trade tensions escalate."

View more earnings on URBN

BofA maintains at Buy and lowers price target from $33 to $28.

MKM: More Evidence Needed

Urban Outfitters' third quarter is off to a solid start and comps trended to positive 4% since the start of August, MKM Partners analyst Roxanne Meyer wrote in a note. This may offer some evidence the company's prior product and mix problems have passed but further evidence of a continued turnaround is needed in light of: clearance carryover could impact margins, promotional activities are required to drive comps and potential shifts in trends in the fall season.

MKM Partners maintains at Neutral and lowers price target from $28 to $25.

Wedbush: 'Bottom Of The Pack'

Investors looking at improving trends so far in the third quarter should be reminded August is a strong month across the entire retail sector, Wedbush analyst Jen Redding wrote in a note. In fact, proprietary search data across multiple retail names has Urban Outfitters at the "bottom of the pack" so far in August.

"We remain on the sidelines awaiting positive inflections from our proprietary data product suite," Redding wrote.

Wedbush maintains at Neutral and lowers price target from $26 to $20.

See Also: 3 Retail Ideas For 2019's Back-To-School Season

KeyBanc: Reasonable Valuation

August-to-date comp improvements management highlighted is encouraging and suggests Urban Outfitters is well positioned within the evolving retail landscape, KeyBanc Capital Markets analyst Edward Yruma wrote in a note. However, the stock is trading near 3.5 times estimated 2020 EV/EBITDA which "looks reasonable" given a combination of strong exposure to online sales, a reasonably sized store count, and strong brands.

KeyBanc Capital Markets maintains at Sector Weight.

Price Action

Shares of Urban Outfitters were trading higher by 7% at $22.33.

Latest Ratings for URBN

Date Firm Action From To
Aug 2019 Maintains Neutral
Aug 2019 Maintains Hold
Aug 2019 Reiterates Buy

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