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Will Ross Stores (ROST) Surpass Earnings Estimates in Q3?

Zacks

Ross Stores, Inc. ROST, an off-price retailer of apparel and home accessories, is scheduled to release third-quarter fiscal 2017 results on Nov 16, after the closing bell. Investors are keen to know whether this California-based company will be able to continue its streak of positive earnings and revenue surprises.

In the trailing four quarters, Ross Stores outperformed the Zacks Consensus Estimate by an average of 6.3%. In the preceding quarter, the company witnessed a positive earnings surprise of 7.9%. Let’s see how things are shaping up before this announcement.

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is 67 cents, reflecting year-over-year growth of 8.1%. We note that the Zacks Consensus Estimate for the company remained unchanged lately. Analysts polled by Zacks expect revenues of $3.3 billion, up approximately 5.9% from the year-ago quarter.

Ross Stores, Inc. Price and EPS Surprise


Ross Stores, Inc. Price and EPS Surprise | Ross Stores, Inc. Quote

Notably, Ross Stores has outperformed the industry in the last three months. The stock has jumped 20% compared with the industry’s gain of 9.8%.



Factors at Play

Of late, Ross Stores has been displaying a solid earnings trend, recording earnings beat in 12 of the past 13 quarters. This strong earnings trend stemmed from the favorable response of value-focused customers to Ross Stores’ extensive collection of brand bargains and solid cost controls. Moreover, its sound financial status, ongoing merchandise initiatives and consistent focus on store expansion bode well.

Following a robust first-half fiscal 2017, the company provided guidance for the second half and accordingly raised earnings view for fiscal 2017. The company anticipates same-store revenues to be up 1-2% in both fiscal third and fourth quarters. Earnings per share are projected in the band of 64-67 cents for the fiscal third quarter, an increase from 62 cents reported last year. For the fiscal fourth quarter, the company anticipates earnings per share in the range of 88-92 cents compared with 77 cents in the prior-year quarter.

Consequently, the company raised its earnings per share view for fiscal 2017 to the range of $3.16-$3.23 compared with $3.07-$3.17 guided earlier. The updated guidance reflects year-over-year growth of 12-14%. These factors collectively underscore the company’s solid future potential.

However, being part of a consumer-driven industry, the company remains prone to threats arising from consumers’ transition toward the dot.com bandwagon. Further, concerns regarding a tough retail environment, stiff competition and cannibalization remain.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Ross Stores is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ross Stores has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 67 cents. While the company’s Zacks Rank #2 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Stocks Poised to Beat Earnings Estimates

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:

Dollar Tree Inc. DLTR has an Earnings ESP of +2.20% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zumiez Inc. ZUMZ has an Earnings ESP of +0.69% and a Zacks Rank #2.

Signet Jewelers Limited SIG has an Earnings ESP of +69.09% and a Zacks Rank #2.

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