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Nordstrom (JWN) Q2 Earnings: Can Online Sales Drive a Beat?

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Nordstrom, Inc. (JWN - Free Report) is slated to release second-quarter fiscal 2017 results on Aug 10. The question lingering in investors’ minds is whether this fashion specialty retailer will be able to deliver a positive earnings surprise in the quarter to be reported.

Nordstrom, Inc. Price and EPS Surprise
 

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

The company has delivered positive earnings surprises consistently in the last four quarters, with an average beat of about 41%. The robust earnings history has also helped shares of the company to jump 10.7% in the last one year, outperforming the industry’s slump of 25.2%. Let’s see how things are shaping up prior to this announcement.


What to Expect?

The current Zacks Consensus Estimate for the quarter under review is pegged at 61 cents compared with 67 cents delivered in the year-ago quarter. However, we noted that our earnings estimate has remained stable over the last 30 days. Further, analysts polled by Zacks expect revenues of $3.7 billion, up almost 2% from the year-ago quarter.

Nordstrom forms part of the Retail – Wholesale sector. Per the latest Earnings Trends, the sector’s earnings are expected to dip 1.6% year over year while revenues are projected to grow 4%.

What the Zacks Model Unveils?

Our proven model shows that Nordstrom may beat earnings because it has the right combination of the two key components.

Zacks ESP: Nordstrom currently has an Earnings ESP of +3.28%. This is because the Most Accurate estimate is 63 cents, while the Zacks Consensus Estimate is pegged lower at 61 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. 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). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

The combination of Nordstrom’s Zacks Rank #3 and a positive ESP make us reasonably confident of a positive earnings beat.

Factors Driving the Better-than-Expected Earnings

Nordstrom’s solid past performance reflects the company’s robust brand image, cost-savings initiatives and impressive omnichannel efforts. The company is undertaking several initiatives to keep pace with customers’ shift to online shopping. Evidently, Nordstrom has been focused on technological advancement, through development of e-commerce and digital networks, and improvement of supply-chain channels and marketing efforts. Backed by these endeavors, the company’s online business crossed $3 billion in fiscal 2016, thus resulting in annualized growth of nearly 30% since 2010. Further, Nordstrom’s online sales formed nearly 24% of the company’s business in first-quarter fiscal 2017.

Clearly, Nordstrom is making significant progress with respect to its customer-based strategy and it seems to be well on track with its long-term sales target of $20 billion by 2020.  With regard to cost savings, the company plans to strike a balance between its sales and expense growth. We believe that these factors are likely to drive Nordstrom’s growth. Thus, it seems like the company is set to maintain its splendid earnings surprise trend this time as well. Let’s wait and see.

Stocks with Favorable Combination

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

Dollar General Corporation (DG - Free Report) has an Earnings ESP of +0.93% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation (COST - Free Report) has an Earnings ESP of +0.50% and a Zacks Rank #3.

L Brands, Inc. (LB - Free Report) has an Earnings ESP of +2.38% and a Zacks Rank #3.

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