Sterne Agee Raises Estimates On Urban Outfitters (URBN)

Sterne Agee is raising its estimates on Urban Outfitters, Inc. URBN after the company reported better than expected earnings yesterday after the bell. It has a $42 price target and a Neutral rating on shares. In a note sent to clients, Sterne Agee writes, "The improvement in margins in Q4 relative to Q3 is expected to be similar to LY. Our Q4 estimate is fine-tuned higher aided by the buyback and lower tax rate to $0.53 with “store” comps of 2% and consolidated retail comps up 6%. For FY12 store comps up low singles are planned excluding direct and URBN believes it can improve gross margins while the outlook for IMU is less certain. URBN faces less impact from input costs pressures with cotton at under 10% of COGS with a low exposure to China. Lower markdowns are likely which should aid results. Reflecting the benefits of the buyback but more conservative estimate of store comps, our FY12 estimate is unchanged at $1.97 while our FY13 estimate is increased to $2.24 from $2.22." Shares of URBN lost 17 cents yesterday to close at $32.74, a loss of 0.5%.