Ross Stores, Inc. ROST is expected to register year-over-year top and bottom-line growth when it reports third-quarter fiscal 2024 earnings on Nov. 21, after market close. The Zacks Consensus Estimate for earnings is pegged at $1.40 per share, suggesting a 5.3% rise from the $1.33 reported in the year-earlier period. The consensus mark has moved down by a penny in the past seven days.
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The consensus estimate for quarterly revenues is pegged at $5.15 billion, indicating a rise of 4.7% from the year-ago quarter’s reported figure.
ROST has a trailing four-quarter earnings surprise of 9.1%, on average. In the last reported quarter, the company posted an earnings surprise of 6.7%.
Ross Stores, Inc. Price and EPS Surprise
Ross Stores, Inc. price-eps-surprise | Ross Stores, Inc. Quote
What the Zacks Model Unveils for ROST
Our proven model does not conclusively predict an earnings beat for Ross Stores this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Ross Stores currently has an Earnings ESP of -2.18% and a Zacks Rank of 4 (Sell).
Trends Influencing ROST’s Q3 Results
Ross Stores' quarterly performance is expected to have been bolstered by strong growth across its merchandise categories, driven by positive customer responses across both banners. The company's core business likely benefited from consumers' ongoing focus on value and its ability to provide value-driven bargains.
Consistent execution of store expansion plans is also expected to have supported top-line growth. These efforts have focused on expanding penetration in existing and new markets, with contributions from new stores anticipated to be reflected in the to-be-reported quarter’s results.
However, Ross Stores has been cautious regarding the ongoing macroeconomic and geopolitical uncertainties, and persistent inflation, which have been impacting consumer spending on essentials like housing, food and gasoline.
On its last reported quarter’searnings call management emphasized that ROST’s core customer base —primarily low-to-moderate-income shoppers — has been burdened by high costs for necessities. These inflationary pressures have been limiting discretionary spending and reducing the demand for the company’s brands.
As a result, Ross Stores expects sales comparisons to become more challenging in the second half of fiscal 2024. Reflecting this cautious outlook, the company projects fiscal third-quarter total sales to grow 3-5% year over year, with comparable sales increasing 2-3%. Despite tempered sales expectations, it forecasts fiscal third-quarter earnings per share of $1.35-$1.41, suggesting growth from the $1.33 reported last year, driven by planned efficiencies in the second half.
Our model expects year-over-year sales growth of 4.9% and a comps rise of 2.1% for the fiscal third quarter.
Ross Stores anticipates an operating margin of 10.9-11.2% for the quarter, whereas it registered 11.2% a year ago. This reflects reduced incentive, freight and distribution costs, offset by lower merchandise margins, as Ross Stores focuses on offering more competitively priced branded bargains. We anticipate a 30-basis-point contraction in the operating margin to 10.9%, with operating profit rising 2.8% year over year in dollar terms.
ROST Stock’s Price Performance & Valuation Picture
From a valuation perspective, Ross Stores is trading at a discount relative to industry benchmarks. The company has a forward 12-month price-to-earnings ratio of 21.57X, which is below the five-year high of 79.52X but higher than the Retail-Discount Stores industry’s average of 29.6X.
The recent market movements show that ROST’s shares have declined 4.6% in the past three months against the industry's 1% growth.
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Stocks With Favorable Combination
Here are three companies, which according to our model, have the right combination of elements to post an earnings beat this reporting cycle:
Abercrombie & Fitch ANF currently has an Earnings ESP of +4.59% and a Zacks Rank of 2. The company is likely to register growth in the top and bottom lines when it reports third-quarter fiscal 2024 results. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ANF’s quarterly earnings has moved up by a penny to $2.32 per share in the past seven days. The consensus estimate indicates 26.8% growth from the year-ago quarter’s number. The Zacks Consensus Estimate for Abercrombie’s quarterly revenues is pegged at $1.2 billion, which implies growth of 11.7% from the figure reported in the prior-year quarter.
The Gap Inc. GAP currently has an Earnings ESP of +3.05% and a Zacks Rank #2. The company is likely to register growth in the top line when it reports third-quarter fiscal 2024 results. The consensus mark for GAP’s quarterly revenues is pegged at $3.8 billion, which indicates a 0.9% rise from the figure reported in the prior-year quarter.
The consensus mark for GAP’s quarterly earnings has moved down by a penny in the past seven days to 56 cents per share. The consensus estimate indicates a decline of 5.1% from the year-ago quarter’s actual.
Target TGT currently has an Earnings ESP of +1.21% and a Zacks Rank #2. TGT is expected to register top and bottom-line growth when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $25.9 billion, which indicates 2.1% growth from the prior-year quarter’s reported figure.
The consensus estimate for earnings is pegged at $2.29 per share, which implies a 9.1% increase from the year-ago quarter's actual. The consensus mark for TGT’s quarterly earnings has moved up a penny in the past seven days.
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