For Immediate Release
Chicago, IL – September 24, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Urban Outfitters Inc. (URBN), Liberty Global Inc. (LBTYA), CBS Corp. (CBS), Intel Corp. (INTC) and Apple Inc. (AAPL).
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Here are highlights from Friday’s Analyst Blog:
Urban Outfitters: Strong Buy
A solid year-to-date return of 40.1%, strong second-quarter fiscal 2013 results and rising estimates aided Urban Outfitters Inc. (URBN) to attain a Zacks #1 Rank (Strong Buy) on August 23, 2012. This apparel, footwear and accessories retailer has outperformed the Zacks Consensus Estimates in 4 out of 5 quarters and missed in one. The company has topped the Zacks Consensus Estimates by an average of 9.6% over the last five quarters.
The Rank Drivers
Better-than-expected second quarter results, flexible merchandising strategy, investments in direct-to-consumer business and effective inventory management are the rank drivers for this stock.
Urban Outfitters posted second quarter earnings of 42 cents a share on August 20 that surpassed the Zacks Consensus Estimate of 33 cents by 27.3%, and year-ago earnings of 35 cents by 20%. Lower shares outstanding as well as top-line growth benefited the bottom line.
After registering revenue growth of 8.6% in the first quarter of fiscal 2013, Urban Outfitters’ total net sales climbed 11% year over year to $676.3 million during the second quarter, and also came ahead of the Zacks Consensus Estimate of $673 million. Sales improved on the back of new store openings, healthy Direct-to-Consumer sales and strong wholesale operations.
Net sales by brands grew 14.1% to $310.7 million at Urban Outfitters, 3.4% to $281.8 million at Anthropologie and 25.7% to $73.8 million at Free People. Gross profit climbed 10.1% to $254.5 million. However, gross margin contracted 30 basis points to 37.6%. Operating income rose 9% to $95.9 million, while operating margin shriveled 20 basis points to 14.2%.
Earnings Estimate Revisions
The Zacks Consensus Estimate for fiscal 2013 rose 7.5% to $1.58 per share on the back of the upward revision of 5 out of 26 estimates in the last 60 days. The current estimate implies a year-over-year growth of 32.7%.
For fiscal 2014, 5 out of 26 estimates were revised higher over the same time frame, eventually lifting the Zacks Consensus Estimate by 5.5% to $1.92 per share. The current estimate suggests a year-over-year growth of 21.3%.
Urban Outfitters currently trades at a forward P/E of 24.62x, reflecting a 71.6% premium to the peer group average of 14.35x. Also, on a price-to-book basis, the shares trade at 4.79x, a substantial premium to the peer group average of 2.60x. Given the company's strong fundamentals, the premium valuation is justified, and is well reflected through long-term earnings growth projection of 18.7%. The company has a trailing 12-month ROE of 16.9%, which is 120 basis points above its peer group average.
Liberty Global Upgraded from Underperform
We upgrade our recommendation on Liberty Global Inc. (LBTYA) to Neutral based on our view that the company is gradually establishing its strong foothold in the European cable MSO market. Though the company’s second quarter of 2012 financial results fell below the Zacks Consensus Estimates, Liberty Global added a net 364,000 organic revenue generating units, up by a whopping 61% year over year. Despite the fact that the company’s second quarter always remains seasonally weak, operating metrics appeared strong.
We believe the long-term business fundamental of the company is very intriguing, primarily due to strong demand for its digital cable TV service, faster broadband, and triple-play bundled offerings. Chellomedia, the international content division of Liberty Global, recently completed two vital deals.
Chellomedia has bought 13 movie channels of Metro-Goldwyn-Mayer Studio Inc. in Europe, the Middle East, and Latin America. It also acquired the remaining 50% stake of its MGM Latin America venture and the remaining 49% stake of its MGM Central Europe venture. The second deal was the extension of its existing relationship with CBS Corp. (CBS).
Liberty Global has recently launched a hybrid IP video gateway called “Horizon TV” in the Netherlands. This innovative IP gateway will combine cable operator’s video services with web-based content through an integrated cable modem. Horizon runs on Atom CE processor of Intel Corp. (INTC).
The new web-based hybrid modem includes an open software developer platform and application store. Furthermore, customers can share TV showing in multiple screens such as computers, Apple Inc. (AAPL) developed iPhones and iPads. Horizon TV also features an in-build application store for YouTube, Wikipedia and Facebook. This service will be extended in Switzerland, Germany, and Ireland within the next 3-6 months.
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