Zacks Investment Research upgraded shares of Regis Corp. (RGS) from UNDERPERFORM to NEUTRAL on December 11, 2013, with a target price of $16.00.
Regis' first-quarter fiscal 2014 adjusted earnings of $0.01 per share were much better than the Zacks Consensus Estimate of a loss of $0.06 per share, driven by lower operating costs due to the company's cost-saving efforts. However, earnings were down 87.5% year over year. Although total revenue declined 7.3% year over year, it surpassed the Zacks Consensus Estimate by 4.6%. Estimates largely moved upwards after the better-than-expected first-quarter results, encouraging us to return to a Neutral recommendation on the stock. Moreover, Regis has undertaken a set of initiatives to reinvigorate its business. Regis' cost-controlling efforts are expected to contribute to future growth. However, the company's comps have declined for the past 21 quarters due to fall in guest count. In addition, Regis has been affected by the changing fashion trend in the recent years and hence needs novelty in its system to cope with the change. A limited consumer spending environment also remains an overhang preventing us from being too optimistic on the stock.
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