UBS Warburg Upgrades Talbots to 'Buy'
UBS Warburg upgraded Talbots (TLB ) to buy from neutral.
Analyst Richard Jaffe says he is upgrading the stock on the expected improvement in the company's fall calendar year 2003 merchandise assortment, which is likely to fuel sales and provide opportunity for gross margin improvement, particularly during the second half. He notes the apparel retailer has proven in the past that it can engineer a merchandise-driven turnaround by finding merchandise expertise and inspiration leadership both inside and outside the company.
Jaffe also cites the company's strong free cash flow and possible dividend increase in response to President Bush's dividend tax elimination plan. He believes TLB offers compelling valuation.
The analyst sees earnings per share of $1.95 in fiscal year 2003 (ending January) and $2.25 in fiscal year 2004. He has a $32 price target on the stock.
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