FBR Capital Raises Price Target on Gap, Inc. (GPS) to $28 Following Better Than Expected 3Q
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FBR Capital reiterated a Market Perform rating on Gap, Inc. (NYSE: GPS), and raised the price target to $28.00 (from $22.00), following the company's 3Q earnings report. GPS reported EPS of $0.60, in line with the Street's estimate. Total revenue growth was 2%. Management maintained the previously guided 2016 EPS of $1.87–$1.92 (versus consensus of $2.12) and noted that the international business continues to be pressured by FX in addition to other macro pressures.
Analyst Susan Anderson commented, "GPS reported 3Q16 EPS of $0.60, in line with FBR/consensus of $0.60, which excludes a $0.09 negative impact associated with previously announced store closures and streamlining measures and was in line with $0.59–$0.60 EPS guidance provided on November 7 during GPS's October SSS call. The –3% comp for 3Q was primarily driven by the negative impact from the Fishkill distribution center fire. Management reiterated 2016 EPS of $1.87–$1.92 even though 3Q16 was better than expected, implying a lower 4Q16 versus consensus. Management is cautious on 4Q given a fall off in traffic throughout November and additional expenses related to occupancy for the new Times Square flagship, lapping bonus reversals LY, and additional marketing expense. We like the better ON performance, which we believe can continue, but we remain on the sidelines until we see SSS improvement at Gap and sustained gross margin improvement or a more attractive entry point."
Shares of Gap, Inc. closed at $30.71 yesterday.
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