J.P. Morgan Underweight On Jones Apparel As Inflation Sets In (JNY)

J.P. Morgan is raising its earnings estimates, but lowering its price target to $20 from $22 and keeping its Underweight rating on shares of Jones Apparel (NYSE: JNY) after the apparel company reported earnings.

In the report J.P. Morgan writes, "The JNY story continues to evolve as the retail division exhibited a significant turn to profitability (although still expected to be a drag in 2010) and the wholesale business is anticipated to get back to normalized levels by year-end. As such, we believe the incremental opportunity (compared to our model) lies in the retail division as getting back to breakeven would translate to an additional $0.10-0.15 of upside to our current model. We are raising our fiscal 2010 EPS estimates to $1.71 (from $1.63) and lowering our 2011 EPS estimate to $1.83 (from $1.86). We are establishing our Dec 11 price
target of $20 based on an 11x multiple on our fiscal 2011 EPS estimate of $1.83. This compares to our previous Dec 10 price target to $22, which was based on a 12x multiple."

Shares of Jones Apparel closed at $18.48 yesterday, up 3.5%.