Zacks Investment Research upgraded shares of Gap Inc. (GPS) from NEUTRAL to OUTPERFORM on September 21, 2012, with a target price of $40.00.
Based on strong second-quarter 2012 results, we have upgraded our long-term recommendation on Gap to Outperform. Driven by increased sales, improved margins and lower share counts, Gap's earnings of $0.49 per share for the quarter surged 40% from the prior-year period and came ahead of the Zacks Consensus Estimate of $0.48. Moreover, net sales increased 5.6% to $3,575 million during the quarter primarily driven by a 4% increase in comparable store sales. Further, solid quarterly performance prompted management to raise its fiscal 2012 earnings guidance range to $1.95-$2.00 per share from $1.78-$1.83 forecasted earlier. The company is in the midst of its international expansion strategy. Further, to counter the domestic market saturation, Gap is aiming total sales of approximately 30% from its overseas operations and online business by 2013.
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