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Factors to Support Ross Stores' (ROST) Earnings Beat in Q4

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Ross Stores, Inc. (ROST - Free Report) is scheduled to release fourth-quarter fiscal 2022 results on Feb 28. The off-price retailer of apparel and home accessories is likely to have witnessed revenue and earnings growth in the to-be-reported quarter.

The Zacks Consensus Estimate for fiscal fourth-quarter revenues is pegged at $5.13 billion, indicating growth of 2.2% from the figure reported in the year-ago quarter. For fiscal fourth-quarter earnings, the consensus mark of $1.23 per share suggests growth of 18.3% from the year-ago quarter's reported number. The consensus mark for earnings has been unchanged in the past 30 days.

For fiscal 2022 earnings, the consensus mark for earnings is pegged at $4.30, suggesting a decline of 11.7% from the year-ago quarter’s reported figure. The consensus mark has been unchanged in the past 30 days. The Zacks Consensus Estimate for the company’s fiscal 2022 revenues is pegged at $18.6 billion, suggesting a 1.6% decline from the prior-year quarter’s reported figure.

We expect the company’s fiscal fourth-quarter total revenues to increase 1.8% year over year to $5,108.5 million and earnings to rise 14.1% to $1.19 per share. For fiscal 2022, we estimate a revenue decline of 1.7% to $18,590.1 million and an earnings per share decline of 12.4% to $4.27.

In the last reported quarter, Ross Stores delivered an earnings surprise of 23.5%. It has delivered an earnings beat of 10.5%, on average, in the trailing four quarters.

Ross Stores, Inc. Price and EPS Surprise

 

Ross Stores, Inc. Price and EPS Surprise

Ross Stores, Inc. price-eps-surprise | Ross Stores, Inc. Quote

Key Factors to Note

Ross Stores has been benefiting from robust customer demand and improved traffic trends in the retail industry. Sales in the fiscal fourth quarter are likely to have benefited from broad-based growth across merchandise categories and regions, as well as robust comparable store sales. Sales are also expected to have gained from robust trends at the dd's DISCOUNTS business. Gains at the core business, driven by consumers' continued focus on value and the company’s ability to deliver value bargains to customers, bode well.

Ross Stores has been consistent with the execution of its store expansion plans, which are likely to have aided the top line. The company's store-expansion efforts have been focused on continually increasing penetration in existing and new markets. The fourth-quarter fiscal 2022 performance is anticipated to have gained from the company’s return to normal store opening targets. Gains from new stores are expected to get reflected in the company's sales for the fiscal fourth quarter.

On its last reported quarter’s earnings call, Ross Stores was optimistic about its fourth-quarter fiscal 2022 performance, given the third-quarter sales momentum and improved assortments for the holiday season.
The company expects comps to be flat to down 2% in the fiscal fourth quarter, whereas it reported 9% comps growth in the prior-year quarter. Earnings per share are envisioned to be $1.13-$1.26 for the fiscal fourth quarter. The company reported earnings of $1.04 per share in the year-ago quarter.

The earnings view for the fiscal fourth quarter is based on sales of flat to up 3% and the operating margin of 9.7-10.5%. Notably, the company reported an operating margin of 9.8% in the year-ago quarter. The operating margin view indicates gains due to the easing of significant cost pressures from ocean freight and lower incentives in the prior-year quarter.

For fiscal 2022, the company envisions earnings per share of $4.21-$4.34. Notably, it reported $4.87 in fiscal 2021.

However, Ross Stores has been witnessing the effects of the ongoing financial pressures on dd’s DISCOUNTS’ lower-income customer base and increased markdowns. On the last reported quarter's earnings call, Ross Stores anticipated the highly promotional holiday season and inflationary costs to put pressure on low-to-moderate income customers, which are expected to have impacted the performance of dd’s DISCOUNTS stores.

Further, the company’s cost of goods sales is likely to have witnessed continued impacts of lower merchandise margins, unfavorable timing of packaway-related costs and increased markdowns. Unfavorable timing of pack-away-related expenses and deleverage from its new distribution center are expected to have resulted in higher distribution costs.

Zacks Model

Our proven model conclusively predicts 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. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Ross Stores has a Zacks Rank #2 and an Earnings ESP of +3.16%.

Other Stocks With Favorable Combination

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

Burlington Stores (BURL - Free Report) currently has an Earnings ESP of +0.08% and a Zacks Rank of 2. The company is likely to register growth in the bottom line when it reports fourth-quarter fiscal 2022 numbers. The consensus mark for BURL’s quarterly earnings has moved up by a penny in the past seven days at $2.72 per share. The consensus estimate suggests 7.5% growth from the year-ago quarter’s reported number.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Burlington Stores’ quarterly revenues is pegged at $2.6 billion, which suggests a decline of 0.3% from the figure reported in the prior-year quarter.

Foot Locker (FL - Free Report) currently has an Earnings ESP of +3.03% and a Zacks Rank of 2. The company is likely to register top and bottom-line declines when it reports fourth-quarter fiscal 2022 results. The consensus mark for FL’s quarterly revenues is pegged at $2.2 billion, which suggests a decline of 8.3% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Foot Locker’s earnings has been unchanged at 51 cents per share in the past 30 days. The consensus estimate indicates a 69.5% decline from the year-ago quarter’s reported figure.

Target (TGT - Free Report) currently has an Earnings ESP of +5.88% and a Zacks Rank of 3. The company is likely to register declines in the top and bottom lines when it reports fourth-quarter 2022 results. The consensus mark for TGT’s quarterly revenues is pegged at $30.7 billion, which suggests a 1% decline from the figure reported in the prior-year quarter.

The consensus mark for TGT’s quarterly earnings has moved down by a penny in the past seven days to $1.38 per share. The consensus estimate suggests a decline of 56.7% from the year-ago quarter.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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