Urban Outfitters' Earnings Coming Soon: Here's What Wunderlich Is Watching

In a report published Thursday, Wunderlich analyst Eric Beder maintained a Buy rating on shares of Urban Outfitters, Inc. (NASDAQ: URBN) with a $49 price target ahead of the company's first quarter print on Monday.

"We continue to believe the Street (with the sell side still over 50 percent Hold-rated on the name) does not fully grasp the overall margin upside potential for the company as they return to positive comps and begin to slow down the rate of infrastructure spend, especially in the second half of 2016," Beder wrote.

Beder also noted that Urban Outfitters continues to raise average unit revenue (ARU) and comps which is a "powerful" combination for SG&A leverage and further upside.

The analyst is expecting Urban Outfitters to earn $0.30 per share in the first quarter on revenue of $774,122 million. The Estimize Consensus earnings per share estimate (based on 16 estimates) stands at $0.31 on revenue of $761.49 million. This compares to the Wall Street consensus earnings per share estimate of $0.30 and revenue of $759.54 million.

Beder further argued that a $0.30 earnings per share estimate could prove to be conservative if Urban Outfitters core and Free People register "solid" comps for the quarter. In addition, AURs have continued to "materially" increase during the quarter at a time when the company's inventory wasn't impacted by the West Coast port slowdown.

Finally, the analyst stated that the company's margin and comp story "remains intact," especially in the bottom half of the fiscal year.

Bottom line, the Street is "slowly waking up" as there remains potential for operating performance upside and there is "still time" for investors. In fact, Urban Outfitters remains Beder's favorite specialty retailing long position.