Urban Outfitters (URBN) is positioned to mitigate more of the tariff headwinds than previously expected by shifting the country of origin for goods, negotiating with vendors, adjusting transportation modes, and raising prices selectively, UBS Securities said.

The company reported fiscal Q2 net income of $1.58 per diluted share, compared with $1.24 a year earlier and ahead of the $1.48 expected by analysts. Net sales for the period ended July 31 rose to $1.50 billion from $1.35 billion a year earlier, topping the $1.48 billion consensus.

The brokerage said in a Monday note that the company's fiscal Q2 beat was helped by lower markdowns and rent leverage.

The firm raised its gross margin estimates for Q3 and Q4 by 20 and 80 basis points, respectively, and lifted Q3 sales and adjusted EPS forecasts to $1.46 billion and $1.21, respectively.

For 2025, UBS now models sales of $6.04 billion and adjusted EPS of $5.15, while its longer-term EPS forecasts for 2026 and 2027 were each increased by $0.05 on a stronger margin outlook.

The brokerage also pointed to mid-single digit comparable sales growth modeled for Anthropologie, Free People, and Urban Outfitters brands.

The firm said it continues to expect the stock to perform in line with peers over the next 12 months.

UBS raised its price target to $79 from $78 and reiterated its neutral rating on the company's stock.

Price: 66.75, Change: -0.32, Percent Change: -0.47