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TheStreet Open House

How Will Foot Locker (FL) Stock Respond To This Analyst Downgrade?

Stock quotes in this article: FL, PJC

NEW YORK (TheStreet) -- Shares of Foot Locker Inc  (FL) are slipping -0.59% to $53.80 in pre-market trading today after Piper Jaffray downgraded the company to "neutral" from "outperform" despite its increased price target of $57 from $54.

The firm cited valuation and peak margins for its cut in rating. 

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Separately, TheStreet Ratings team rates FOOT LOCKER INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate FOOT LOCKER INC (FL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 14.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FL's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 54.34% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, FL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • FOOT LOCKER INC has improved earnings per share by 22.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, FOOT LOCKER INC increased its bottom line by earning $2.85 versus $2.59 in the prior year. This year, the market expects an improvement in earnings ($3.30 versus $2.85).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Specialty Retail industry average. The net income increased by 17.4% when compared to the same quarter one year prior, going from $138.00 million to $162.00 million.
  • You can view the full analysis from the report here: FL Ratings Report

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