D.A. Davidson Reiterates Buy Rating, Raises PT On Pacific Sunwear Of California On Strong Finish To 2014

In a report published Thursday, D.A. Davidson analyst Andrew Burns reiterated a Buy rating on Pacific Sunwear of California, Inc. (NASDAQ: PSUN), and raised the price target from $3.25 to $4.00.

In the report, D.A. Davidson noted, "PSUN reported comps, revenue and non-GAAP EPS of 6.0%, $231.6 million and $(0.10), compared to consensus estimates of 8.3% (Retail Metrics), $229.5 million and $(0.11), and our estimates of 6.0%, $232.2 million and $(0.11), respectively. GAAP EPS was $(0.38). 4Q14 guidance called for a 6.0% comp, 400bp-500bp gross margin improvement, and non-GAAP EPS (adjusted for a normalized tax rate) of $(0.12)-$(0.11).

"Average ticket was up 10%, while transactions were down 3%; the men's business comped up 7%, and women's increased 4%. Gross margin increased 606bp y/y to 26.1%, driven by higher merchandise margins and inventory productivity. SG&A increased 16% to $67.5 million, or 29.1% of sales, (vs. 26.7% in 4Q13), in part from higher incentive compensation."

Pacific Sunwear of California closed on Wednesday at $2.87.