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Check Ross Stores' (ROST) Probability to Beat Earnings in Q4

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Ross Stores, Inc. (ROST - Free Report) is slated to report fourth-quarter fiscal 2018 results on Mar 5.

The company has an impressive earnings surprise history, having surpassed estimates for 10 straight quarters now. Also, it posted a trailing four-quarter average beat of 3.6%.

Notably, the Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.13, mirroring 15% growth year over year. Estimates have been stable over the past 30 days. For revenues, the consensus mark stands at $4.05 billion, reflecting a marginal dip of 0.5% from the year-ago quarter number.

Ross Stores, Inc. Price and EPS Surprise

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

How Things Are Shaping Before 4Q18 Earnings

Ross Stores has been gaining from its ongoing success in delivering broad assortments of compelling bargains to value-focused customers. Further, the company’s solid endeavors including better price management, merchandise initiatives, cost containment and store-expansion plans position it well for growth. Its off-price model offers a strong value proposition and micro-merchandising that drive better product allocation and margins. Moreover, broad-based strength across major merchandise categories and robust comparable store sales (comps) growth have been providing a boost to top-line growth.

Backed by all these robust efforts, the company is expected to deliver solid top- and bottom-line performances in the to-be-reported quarter. Earlier, management had anticipated comps growth of 1-2% for the fiscal fourth quarter. Earnings per share are envisioned to be $1.09-$1.14 for the quarter and $4.15-$4.20 for fiscal 2018.

Moreover, Ross Stores has consistently been on track with respect to its store-expansion plans. This is quite evident from the opening of 40 stores in the last reported quarter, which marked the completion of the targeted 100 store openings for fiscal 2018, comprising 75 Ross and 25 dd’s DISCOUNTS stores. It expects to end fiscal 2018 with about 1,477 Ross and 235 dd’s DISCOUNTS stores, reflecting a net increase of 95 locations in the year.

However, higher freight and wage-related investments have been hurting Ross Stores' margins for a while now. In fact, higher freight costs have been a headwind for the company for over a year now. Notably, a significant rise in market rates on very tight capacity due to driver shortages, impacts of increased regulation and stronger economy led to increase in freight costs. Management expects headwinds related to higher freight costs and wage investments to persist throughout fiscal 2018. Consequently, operating margin is projected to be 12.6-12.8% for the fiscal fourth quarter, reflecting a 14.6% decline from the year-ago quarter.

What the Zacks Model Unveils

Our proven model does not conclusively show that Ross Stores is likely to beat estimates in fourth-quarter fiscal 2018. 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.

Although Ross Stores has a Zacks Rank #3, its Earnings ESP of -1.24% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

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

Zumiez Inc. (ZUMZ - Free Report) has an Earnings ESP of +0.45% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch (ANF - Free Report) has an Earnings ESP of +2.28% and a Zacks Rank #2.

Costco Wholesale Corporation (COST - Free Report) has an Earnings ESP of +0.62% and a Zacks Rank #3.

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