FBR Capital Starts Coverage on Abercrombie & Fitch at "Outperform" (ANF)

FBR Capital Starts Coverage on Abercrombie & Fitch at “Outperform” (ANF)


Though teen retailers have been struggling as of late, analysts at FBR Capital believe that Abercrombie & Fitch Co. (ANF) is the strongest brand in the space and that its stock currently offers an attractive valuation. As such, the analysts initiated coverage on the retailer at “Outperform” on Wednesday.

The analysts see shares of ANF reaching $43, which suggests a 20% upside to the stock’s Tuesday closing price of $35.91.

“While ANF arguably has the best brand among the teen retailers, it has still suffered from the weakness in the space, and we believe a longer-term fundamental fix is needed to put ANF back on track,” FBR Capital analyst Susan Anderson noted. “However, at current levels (11x consensus 2014 EPS versus ANF’s 10-year average of 14x and AEO’s of 12x), strong FCF and the floor on the stock created by the takeout potential make the shares attractive, with any turn in the business a free option. We also like ANF’s strong brand recognition, international exposure, e-commerce growth, and cost-cutting initiatives. While 2H13 and the holiday season could be weaker than expected, we believe relatively conservative assumptions are already priced in and would be buyers, particularly on weakness in this environment.”

Abercrombie shares were inactive during pre-market trading on Wednesday. The stock is down 25.14% year-to-date.

The Bottom Line

Shares of Abercrombie & Fitch (ANF) offer a dividend yield of 2.23% based on Tuesday’s closing price of $35.91 and the company’s annualized dividend payout of 80 cents per share.

Abercrombie & Fitch Co. (ANF) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.3 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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