Zacks Investment Research upgraded shares of Sears Holdings Corporation (SHLD) from UNDERPERFORM to NEUTRAL on May 24, 2012, with a target price of $60.00.
Despite a 2.8% decline in top line, Sears' first-quarter 2012 loss per share narrowed to $0.31 from $1.34 in the prior-year period and fared better than the Zacks Consensus estimate of a loss of $0.59. The improved results were primarily driven by its ongoing cost reduction, inventory management, strengthening liquidity strategies and merchandise initiatives. Moreover, adjusted EBITDA margin expanded 150 basis points to 2.1% from 0.6% in the prior-year quarter. The company has revamped its organizational structure and operating model in an effort to simplify its business lines. Apart from this, Sears has been focusing on improving margins through leverage on buying and occupancy expenses. However, intense competition and exposure to adverse foreign currency translations may undermine Sears' future operating performance. Currently, we are maintaining a long-term Neutral recommendation on the stock.
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