Thursday, KeyBanc Capital upgraded Oxford Industries Inc. (OXM) shares to Buy from Hold with a price target of $18. The brokerage increased its 2009 EPS estimate to $1.02 from $0.71, and its 2010 estimate to $1.11 from $0.91.
Analyst Edward Yruma upgraded the stock given stronger trends, adroit execution, and favorable second half of 2009 comparisons at Tommy Bahama. The company has adeptly executed during much of the downturn and has exited underperforming businesses while maintaining pricing discipline.
The analyst said that the second quarter's results begin to bear fruit of this and, in particular, an aggressive $50 million reduction in run-rate SG&A. The analyst's recent management meetings, coupled with channel checks, point to sustained momentum within Tommy Bahama. At 0.5x EV/Sales, vs. a 0.7x Apparel group mean and a 1.4x Specialty Retail group mean, the analyst finds the valuation attractive.
The analyst noted that management moved up its targeted annual run-rate SG&A cuts from $40 million to $50 million, 530 basis points of 2008 sales. The analyst thinks that this could show upside, particularly given recent restructuring activities at Ben Sherman and the legacy businesses.
The analyst said that this was the primary driver of the second quarter of 2009 EPS beat relative to his above consensus view, second quarter of 2009 pro forma EPS of $0.30 vs. the consensus view of $0.07 and his view of $0.11.
Currently, OXM is up $2.93 or 20.78% and trading at $17.03.
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