Urban Outfitters Inc. (URBN) earned 42 cents per share in the second quarter of fiscal year 2013 nine cents ahead of analyst estimates calling for 33 cents per share. Revenue of $676 million, up 11% year-over-year, also came in above estimates. Strength in the quarter also came from direct-to-consumer sales which increased 22% year-over-year; a segment that accounts for about 20% of revenues. Also the much smaller wholesale segment rose 17% year-over-year; however it still only accounted for 5.5% of sales.
With the average target share price around $30 per share and the stock now well above this level I think you could see analysts upping their targets on this stock. While the stock has performed well, its valuation does not appear stretched. The stock has a PEG ratio of about 1.3, and has no debt with cash of about $270 million dollars.
Through the first six months of the year the company has added 28 new stores. Even with that the company only operates 207 Urban Outfitters stores, 173 Anthropologie stores, and 72 Free People stores. Additionally Free People wholesale products are carried in approximately 1,400 retail stores. Analysts are looking for the company to grow revenue over 11% both this year and next. The company's growth rate along with execution on tightening store inventories should keep earnings growing.
News of the strong earnings results pushed the stock up over 17% in after hours trading, well past the significant resistance level around $33.50 per share. I think this strong earnings result could help push Urban shares to new heights however I would wait to jump into this stock. This stock may well come back down towards the $33.50 price where I think it could find support and then begin another move higher. The stock has also had high short interest so some the reaction to earnings could be short covering; all the more reason to watch for this name to come in before buying.
Data sourced from: Company filings, and Yahoo!Finance. Chart from: Freestockcharts.com