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Nordstrom (JWN) to Post Q4 Earnings: What’s in the Cards?

Zacks

Nordstrom Inc. JWN is slated to report fourth-quarter fiscal 2016 results on Feb 23, after the closing bell. The big question facing investors is, whether this leading fashion specialty retailer will be able to deliver a positive earnings surprise in the quarter to be reported.

Last quarter, the company had delivered a positive earnings surprise of 61.5%. In fact, the company has outperformed the Zacks Consensus Estimate by an average of 9.3% in the trailing four quarters, with a beat delivered in the last two quarters. Let’s see how things are shaping up for this announcement.

Nordstrom, Inc. Price and EPS Surprise


Nordstrom, Inc. Price and EPS Surprise | Nordstrom, Inc. Quote

Factors Influencing This Quarter

Given a sturdy third-quarter, and Nordstrom’s inventory management and operational efficiency enhancement efforts, management raised its earnings outlook for fiscal 2016. The company envisions fiscal 2016 earnings per share in the range of $2.85–$2.95, up from $2.60–$2.75 projected earlier.

Overall, the company seems to be doing well driven by a robust brand image, amendments to its operating model to generate cost savings and constant store expansion efforts. In the process, management plans to cut costs through a phased approach and eliminate about 300–400 jobs, which if concluded on time, is likely generate cost savings worth $60 million in fiscal 2016.

Additionally, the company’s progress on its 2020 strategy, which targets reaching revenue of $20 billion by 2020, also bodes well. Alongside, management remains keen on advancing in the technology space by boosting eCommerce and digital networks, as well as improving supply-chain channels and marketing efforts.

Despite these favorable factors, Nordstrom’s shares have declined 22% in the last three months, underperforming the Zacks categorized Retail–Apparel/Shoe industry’s fall of 15.5% in the same period.



Further, the Zacks Consensus Estimates for the fourth quarter and fiscal 2016 have been witnessing a downtrend ahead of the company’s earnings release. Estimates for fourth-quarter and fiscal 2016 have declined by 2 cents each to $1.15 per share and $2.92 per share, respectively. The current Zacks Consensus Estimate of $1.15 for the fourth quarter, reflects a year-over-year decline of nearly 2%.

That said, we would wait and see what is actually in store for this leading fashion specialty retailer in the fourth quarter.

Earnings Whispers

Our proven model does not conclusively show that Nordstrom is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Nordstrom is currently pegged at -2.61%. This is because the Most Accurate estimate of $1.12 is pegged below the Zacks Consensus Estimate of $1.15. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Nordstrom currently carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company’s ESP of -2.61% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Dean Foods Co. DF, scheduled to report earnings on Feb 16, currently has an Earnings ESP of +2.44% and a Zacks Rank #3.

Costco Wholesale Corp. COST, slated to report earnings on Mar 2, currently has an Earnings ESP of +0.74% and a Zacks Rank #3.

Dollar Tree Inc. DLTR, expected to release earnings on Mar 7, has an Earnings ESP of +0.75% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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