This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Abercrombie Shares Gain on Upgrade

Stocks in this article: ANF

NEW YORK ( TheStreet) -- Shares of Abercrombie & Fitch (ANF) got a lift on Monday after Brean Murray upgraded the stock to buy and set a $65 price target, declaring it's time to get "more aggressive" on the name.

The firm, which also boosted its earnings views for fiscal 2013 and 2014, said it believes mild weather in February and March was a big help for New Albany, Ohio-based company, allowing it to winnow down what was a significant inventory position headed into 2012, and this should help margins rebound later in 2012.

Brean also thinks the stock is cheap at current levels, noting that its new price target represents a 13X forward price-to-earnings multiple for Abercrombie on a cash-adjusted basis using its higher estimate for a profit of $4.44 a share in fiscal 2014 vs. a prior projection for earnings of $4.31.



The stock gained 4.4% to $51.78 in afternoon action. Based on Friday's close at $49.61, the shares were down more than 16% in the past year; although they've bounced 23% since hitting a 52-week low of $40.25 on Feb. 3.

"One of our major fears was that the company would continue to underperform under the weight of an over 40% increase in inventory per square at the end of 4QFY12," Brean wrote. "With record warm weather in March, we are seeing the return of out of stocks on key seasonal items such as denim, and material progress on clearing out left over winter goods. While there will be an impact on margins (we are modeling a 400 bp decline in gross margins in 1QFY13), we believe the worst is over in terms of inventory weakness, which should allow for a quicker margin recovery going forward."

The firm is expecting discounting to slow down from here on out, especially with the company working to close underperforming U.S. stores. Abercrombie is slated to report its fiscal first-quarter results on May 17. The average estimate of analysts polled by Thomson Reuters is for earnings of a penny per share on revenue of $953.6 million for the three months ending in April.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,810.06 +91.06 0.51%
S&P 500 2,063.50 +10.75 0.52%
NASDAQ 4,712.97 +11.1030 0.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs