6 Retail Stocks to Buy: Analysts

NEW YORK (TheStreet) -- Shares of Limited Brands (LTD), The Finish Line (FINL), eBay (EBAY), DSW (DSW), Cabela's Incorporated (CAB) and Penske Automotive Group (PAG) have up to 49% upside potential, according to analysts' 12-month target price.

Retail majors Wal-Mart ( WMT), Home Depot ( HD) and Target ( TGT) delivered strong results for the June quarter. Wal-Mart and Home Depot have upped their outlook for the remainder of the year. Analysts foresee upside potential of 26% to 49% for these stocks over the next one year.
6. Limited Brands ( LTD) is a specialty retailer of women's personal care products.

Adjusted EPS for the first quarter of 2011 was 40 cents, up from 25 cents in the same quarter prior year. First quarter operating income was $266.8 million compared to $185 million last year, while net income came in at $129.8 million, vs. $82.9 million in the corresponding quarter of 2010.

Comparable store sales for the March quarter grew 15% and net sales rose from $1.93 billion to $2.22 billion in the same period.

Management estimates 2011 second-quarter adjusted EPS at 38 cents to 43 cents compared to adjusted EPS of 36 cents per share in the June quarter of 2010. For fiscal 2011, the company expects adjusted earnings per share of $2.25 to $2.45. Analysts surveyed by Bloomberg project 26% upside over the next one year with 48% buy ratings.

5. The Finish Line ( FINL) operates as a mall-based specialty retailer in the U.S.

Net sales for the first quarter of fiscal 2012 were recorded at $299.5 million, up 6% from $282.4 million in the year-ago quarter. Comparable store sales grew 6.5% in the first quarter, improving on a month-to-date basis from May 29, 2011 to June 19, 2011 by 14.5%, above the 6.8% increase registered in the same period a year ago.

First quarter net income increased from $13.7 million to $16.4 million during the first quarter of 2011. EPS increased to 30 cents from 25 cents a year ago, representing 20% rise year-over-year.

As of June, the company had no interest-bearing debt and had $287 million in cash and cash equivalents. Finish Line repurchased 0.4 million shares worth $9.6 million of its outstanding common stock in the first quarter. The stock has 100% buy ratings and an estimated 35% upside over the next one year, according to a Bloomberg consensus.

4. eBay ( EBAY) provides the world's largest online merchandise platform for buyers and sellers through PayPal. The company completed the acquisition of GSI, a leading provider of ecommerce and interactive marketing services, on June 17, 2011.

Revenue for the second quarter of 2011 increased 25% to $2.8 billion from the same period prior year. The GSI segment contributed $23.8 million towards revenue for the period from June 17, 2011 to June 30, 2011. ebay recorded second-quarter net income of $283.4 million, or 22 cents per diluted share.

PayPal delivered its first-ever billion dollar revenue quarter, driven by merchant services as well as increased penetration on eBay. PayPal ended the June quarter with 100.3 million active registered accounts, rising 15% year-over-year.

eBay estimates net revenue in the range of $11.3 to $11.6 billion for 2011. Analysts' consensus estimate pegs the stock's average gains at 31% over the next one-year with buy ratings of 55%.

3. DSW ( DSW) is a branded footwear retailer in the U.S.

Net sales improved 12% to $503.6 million in the first quarter of 2011. Operating profit increased 29% to $63.3 million from $49.1 million in the same quarter prior year and operating profit margins were up 12.6% from 10.9% in the first quarter of 2010.

Net income was $38.4 million against $30.2 million in the year-ago period. During the first quarter of 2011, DSW opened seven new stores, taking the count to 318 stores. The company has zero debt with cash and investments totaling $393 million as against $304 million at the end of the first quarter 2010.

The company expects annual sales to increase in the mid single-digit range and EPS of $2.65 to $2.80 for fiscal 2011. The company expects to open 18 DSW stores in fiscal 2011. Analysts surveyed by Bloomberg expect the stock to gain 30% over the next one-year and affirm 91% buy ratings.

2. Cabela's Incorporated ( CAB) operates as a specialty retailer and provider of outdoor merchandize and services.

During the second quarter of 2011, total revenue increased 7.7% to $562.1 million. Retail store revenue was up 12% to $329.2 million; financial services revenue grew 24.4% to $70.3 million, while direct revenue declined 4.6% to $159.6 million. For the quarter, comparable store sales increased 4.4%.

Net income during the quarter was $22.3 million, vs. $19.4 million in the year-ago quarter, and EPS was 32 cents as against 28 cents in the June quarter of 2010.

On the stores front, Tommy Millner, Cabela's CEO, said, "Additionally, the initial performance of our recently opened next generation stores is very encouraging as they are each generating sales and profitability per square foot higher than the corporate average. This provides us with increased confidence to invest in more next generation retail stores. For 2012, we now expect to open five stores, four in the United States and one in Canada, increasing our retail square footage nearly 10%. This is the largest number of store openings in four years."

On average, analysts expect the stock to gain 48% over the next one year with buy ratings of 67%.

1. Penske Automotive Group ( PAG) is an automotive retailer with more than 300 franchises. The company has equal presence in the U.S and worldwide.

Revenue increased 10.5% to $2.9 billion on a 6.3% increase in total retail unit sales. The revenue increase was highlighted by higher average transaction prices on both new and used vehicles during the quarter, especially from premium/luxury brands.

On the strong quarter, Penske Automotive Group Chairman Roger Penske, said, "We offset the 1.1% decline in new retail unit sales with a 16.1% increase in used retail vehicle sales and higher gross profit per new and used retail unit sold. Additionally, the Company's premium luxury brand mix in the U.K. continued to perform well, as same-store retail sales of new units outperformed overall U.K market registrations, which declined by 5.2% in the second quarter according to industry data."

Analysts polled by Bloomberg project 49% upside over the next one-year with 50% buy ratings. The stock has more than doubled in the last one year and is trading at 11 times its estimated 2011 earnings.

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