Citi Trends, Inc. (CTRN) Maintains Neutral Rating

Analyst Patrick McKeever at MKM Partners has released an update on Citi Trends, Inc. (NASDAQ: CTRN). The company reported its fourth-quarter results on Friday.

Citi Trends reported EPS of $0.78 in its fourth-quarter, a 13% increase from last year and $0.04 above MKM’s estimate. The earnings upside came in despite a shortfall in top-line. However, sales are already seeing a rebound in this quarter as the spring assortment gains traction, according to MKM Partners.

MKM Partners has raised EPS estimate for FY10. It now expects EPS of $1.65 in FY10. The previous estimate was of $1.55. EPS for first-quarter is expected at $0.66.

Citi Trend shares are currently trading at about 19x MKM's 2010 EPS estimate, and 15.5x MKM's 2011 EPS estimate. Although these multiples are higher than those for other retail stocks, MKM believes that Citi Trends is an early stage growth story, with a cash-rich and debt fee balance sheet, and some of the best unit economics in retailing.

MKM has raised the fair value estimate for Citi Trends, Inc. stock from $27 to $35, however, it continues to rate the company as Neutral due to volatile fundamentals.