What to Look for in Urban Outfitter’s Earnings

Urban Outfitters Inc. (NASDAQ: URBN) is scheduled to report its fourth-quarter financial results after the markets close on Monday. The consensus estimates call for $0.56 in earnings per share (EPS) on $1.02 billion in revenue. In the same period of last year, the retailer posted EPS of $0.60 and $1.01 billion in revenue.

This company was selected by Merrill Lynch as a top thematic play for millennials due to its unique private and third-party apparel selections. Maybe even millennials need to actually go try on $200 jeans before they buy them. Urban Outfitters is worth about $3.2 billion, but what is interesting here is that this is also a value investing stock now. The firm has a Buy rating and a $30 price objective on Urban Outfitters.

With multiple units that sell clothing and other merchandise, Urban Outfitters has enjoyed massive growth for years. In many ways, Urban Outfitters did what Gap did in the 1990s, but that has since slowed into a more mature story.

It seems as though the massive growth trajectory of yesteryear’s Urban Outfitters is becoming one of value investing now. Private equity firms might love to own Urban Outfitters, if the stock gets much cheaper, but that is for a separate view than paid dividends. Urban Outfitters has bought back stock on and off for the past four years or so and managed to shrink its float by what may be 20%, while still accumulating cash on its balance sheet.
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Prior to the release of the earnings report, a few analysts weighed in on Urban Outfitters:

• Robert Baird had an Outperform rating with a $29 price target.
• RBC Capital has a Sector Perform rating with a $25 price target.
• Brean Capital reiterated a Buy rating with a $32 price target.

So far in 2016, Urban Outfitters has outperformed the broad markets, with the stock up nearly 22%. However, over the past 52 weeks the stock is actually down about 29%.

Shares of Urban Outfitters were trading at $27.99 midday Monday, with a consensus analyst price target of $26.93 and a 52-week trading range of $19.26 to $47.25.