The Zacks Analyst Blog Highlights:Abercrombie & Fitch, Citi Trends, DSW, American Eagle Outfitters and BorgWarner

Jan 22, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Jan. 22, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Abercrombie & Fitch Company (NYSE: ANF), Citi Trends Inc.  (Nasdaq:CTRN), DSW Inc. (NYSE: DSW), American Eagle Outfitters Inc. (NYSE: AEO) and BorgWarner Inc. (NYSE: BWA).


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Here are highlights from Monday's Analyst Blog:

A&F Upgraded to Strong Buy

On Jan 16, Zacks Investment Research upgraded Abercrombie & Fitch Company (NYSE: ANF) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Abercrombie has been witnessing rising earnings estimates on the back of strong fiscal third-quarter 2012 results and an enhanced guidance for fiscal 2012. Moreover, this well-known casual apparel retailer has either surpassed or met estimates in the last 4 quarters delivering an average beat of 36.4%. The long-term expected earnings growth rate for this stock is 18.9%.

On Nov 14, Abercrombie reported third-quarter earnings of 87 cents per share, surging more than 52% year over year and significantly beating the Zacks Consensus Estimate of 59 cents. The robust quarterly performance was primarily driven by strong top-line growth along with improved margins and a lower effective tax rate.

Driven by robust sales performances in the international market, total sales increased 9% to $1.170 billion compared with the year-ago quarters' sales. Moreover, Abercrombie's quarterly revenue surpassed the Zacks Consensus Estimate of $1.115 billion.

Based on the strong quarterly performance, Abercrombie raised its earnings guidance for fiscal 2012 to a range of $2.85–$3.00 per share, compared to its earlier projection of $2.50–$2.75.

The Zacks Consensus Estimate for fiscal 2012 increased 18.4% to $2.96 per share as most of the estimates were revised higher over the last 90 days. The current estimate is within the guidance range provided by Abercrombie. For fiscal 2013, the estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 37.5% to $3.58 per share.

Other Stocks to Consider

Besides Abercrombie, other stocks in the apparel retail sector that are currently performing well include Citi Trends Inc. (Nasdaq:CTRN), DSW Inc. (NYSE: DSW) and American Eagle Outfitters Inc. (NYSE: AEO). All these companies carry a Zacks Rank #1 (Strong Buy) except American Eagle, which carries a Zacks Rank #2 (Buy).

BorgWarner Expects Higher Earnings

BorgWarner Inc. (NYSE: BWA) announced that it expects to earn between $5.15 and $5.45 per share for 2013. The range is consistent with the Zacks Consensus Estimate of $5.25 per share and reflects a rise of 15.7%–22.5% from 2011.

Further, the company anticipates revenues to go up 2%–6% in the year based on a 1% rise in global light vehicle production, offset partially by a 3% fall in European light vehicle production.

A couple of months back, the leading manufacturer of powertrain products for the world's major automakers revealed that it expects Asia to account for half of its $2.3 billion in new business from 2013 to 2015, rather than Europe, which is the market leader in new powertrain technology and currently accounts for 45% of its business.

The company plans to reduce its exposure in Europe to 30% of new business due to the economic weakness in the region. The remaining 20% will be drawn from North America.

Asia accounted for 35% of the company's new business from 2010 to 2012. The company now expects China to account for one-third of new business in the region.

Stringent fuel economy and emissions standard as well as advancement in design, manufacturing and materials have boosted the demand for BorgWarner's products, including dual-clutch transmissions (DCT) and turbochargers.

The company expects a threefold increase in demand for DCT modules – which improves fuel efficiency by 15% – to 8 million units by 2016. Meanwhile, it anticipates global sales of turbochargers – which improve fuel efficiency by 7.5% according to the U.S. Department of Energy – to surge 50% to 50 million units by 2017.

BorgWarner, a Zacks Rank #3 (Hold) stock, posted a 3.5% increase in profits to $1.19 per share (excluding non-recurring items) in the third quarter of the year from $1.15 in the same quarter of 2011. The profit was in line with the Zacks Consensus Estimate.

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