Wachovia Raises Aeropostale Estimates

Analyst Joseph Teklits likes the retailer's strong comparisons and improved operating margin

Wachovia raised its estimates and price target on Aeropostale (ARO ).

Analyst Joseph Teklits says results are nicely above his original 65 cents estimate at the end of the third quarter, and are 2 cents better than the latest forecast. Teklits notes comps were consistently strong during the quarter, and says operating margin improved 230 basis points, to 16.5% . He notes the retailer raised its first-quarter and fiscal 2005 (Jan) guidance. Therefore, he upped the 7 cents first-quarter earnings per share estimate to 9 cents, and raised the $1.65 fiscal 2005 estimate to $1.73. He also set $2.05 earnings per share estimate for fiscal 2006.

Teklits says Aeropostale also announced a 3-for-2 stock split, and the company said it was raising its share buyback by $35 million, which brings the total repurchase program up to $70 million. He has a $37 to $41 12-month valuation range, which incorporates a p-e of 18 to 20, based on his fiscal 2006 earnings per share estimate.

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