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Will Ross Stores (ROST) Miss Earnings Estimates in Q1? - Analyst Blog

Zacks Equity Research
Updated

One of the major off-price retailers of apparel and home accessories, Ross Stores Inc. ROST is set to report its first-quarter fiscal 2015 results on May 21. Last quarter, the company posted a positive earnings surprise of 8.1%. Let us see how things are developing for this announcement.

Factors Influencing the Quarter

Ross Stores’ sustained focus on cost containment, inventory management and merchandise initiatives has kept it afloat in a sluggish consumer environment.

However, in spite of a strong fiscal 2014, the company provided a conservative guidance for first-quarter fiscal 2015. The company expects earnings per share for the first quarter in the band of $1.21–$1.26 compared with $1.15 earned in the year-ago quarter. Comparable-store sales are anticipated to grow by 2–3% over the same period. Total sales are also expected to increase 6% to 7% over the prior year. The company has given this conservative outlook heeding the volatile macroeconomic and retail environment.

We must also keep in mind that Ross Stores operates in the highly fragmented retail apparel market and faces intense competition from other well-established stores.

Earnings Whispers

Our proven model does not conclusively project Ross Stores as likely to beat earnings estimates this quarter.

Zacks ESP: Ross Stores currently has an Earnings ESP of -0.78%. This is because the Most Accurate estimate stands at $1.27, while the Zacks Consensus Estimate is pegged at $1.28.

Zacks Rank: Ross Stores carries a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 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:

American Eagle Outfitters, Inc. AEO has an Earnings ESP of +18.18% and a Zacks Rank #2 (Buy).

Foot Locker Inc. FL has an Earnings ESP of +0.81% and a Zacks Rank #3.

Lowe's Companies Inc. LOW has an Earnings ESP of +2.70% and a Zacks Rank #3 (Hold).

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Zacks Investment Research