On Wednesday, Citi maintained its Neutral rating on Urban Outfitters, Inc. (NASDAQ:URBN) with a steady price target of $44.00.
Urban Outfitters reported a first-quarter earnings per share (EPS) of $0.69, surpassing the consensus estimate of $0.54. This performance was attributed to better-than-expected comparable store sales, which grew by 5% compared to the anticipated 3.5%, and a gross margin improvement of 110 basis points, exceeding the forecasted 30 basis points.
Despite the positive first-quarter results, Urban Outfitters' management has provided a second-quarter EPS guidance of approximately $1.00, which falls short of the consensus estimate of $1.15.
This guidance is influenced by an expected decline in gross margin by 75 basis points, contrary to the consensus projection of a 50 basis point increase. The anticipated margin contraction is due to increased promotional activity aimed at addressing excess inventory at the Urban Outfitters brand.
Looking ahead, the company's management has reaffirmed its full-year fiscal 2024 guidance with an implied EPS of around $3.60. This outlook is based on the assumption of improved gross margins in the second half of the year as the company cycles through significant markdowns from the previous year. Current quarter-to-date comparable store sales have shown improvement, although the gains are largely driven by promotional strategies.
Citi's analysis suggests that while the first quarter showed robust results, the path ahead for Urban Outfitters may be challenging. The firm anticipates risks to the second-half guidance, considering the potential trade-off between sales and margins at the Urban Outfitters brand.
With the stock trading at a forward fiscal 2023 enterprise value to EBITDA multiple of approximately 6.5 times, Citi believes that the risk/reward profile is balanced at the current stock price levels.
InvestingPro Insights
Urban Outfitters, Inc. (NASDAQ:URBN) has recently shown a remarkable performance, with a notable first-quarter earnings beat and a robust year-to-date price total return. According to real-time data from InvestingPro, the company's market capitalization stands at a healthy $3.85 billion, and the stock is trading at a P/E ratio of 13.37, which adjusts to 12.8 for the last twelve months as of Q4 2024. This suggests that the company is trading at a low P/E ratio relative to near-term earnings growth, an InvestingPro Tip that could be of interest to investors seeking growth at a reasonable price.
Moreover, Urban Outfitters has exhibited a large price uptick over the last six months, with a 29.86% return, and a substantial one-year price total return of 52.81%. This could signal strong market confidence in the company's future, aligning with the InvestingPro Tip highlighting the company's high return over the last year. For those considering adding URBN to their portfolio, it's worth noting that the stock has been quite volatile, which may appeal to traders looking for dynamic price movements.
For more in-depth analysis and additional InvestingPro Tips on Urban Outfitters, including the company's ability to cover interest payments with cash flows and its moderate level of debt, visit https://www.investing.com/pro/URBN. Discover a total of 9 tips that could guide your investment strategy. To access these insights, use the exclusive coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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