Story updated at 9:50 a.m. to reflect market activity.
Shares of GNC gained 0.5% to $39.35 in morning trading.
The analyst firm raised its price target for the company to $46 from $34. GNC has reduced its promotions, and faces easier near-term comps, according to Wedbush analyst Kurt Frederick.
"We have seen a decline in store promotional activity in recent weeks following heavy discounting in July/August," Frederick wrote. "Although trends haven't experienced noticeable improvement, recent mailer with coupons personalized to prior purchases, signage less focused on discounting and new products including expanded MusclePharm and GNC PureEdge product lines are a step in the right direction,in our view. Online promotions remain high, however, which we expect to continue."
Separately, TheStreet Ratings team rates GNC HOLDINGS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate GNC HOLDINGS INC (GNC) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GNC HOLDINGS INC has improved earnings per share by 5.5% 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, GNC HOLDINGS INC increased its bottom line by earning $2.72 versus $2.29 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $2.72).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Specialty Retail industry and the overall market, GNC HOLDINGS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 40.37% is the gross profit margin for GNC HOLDINGS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 10.35% is above that of the industry average.
- GNC, with its decline in revenue, slightly underperformed the industry average of 0.0%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Currently the debt-to-equity ratio of 1.81 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, GNC's quick ratio is somewhat strong at 1.00, demonstrating the ability to handle short-term liquidity needs.
- You can view the full analysis from the report here: GNC Ratings Report
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