Nordstrom Q3 Earnings: Can JWN Hit Its $0.65 EPS Target?

in INVESTING IDEAS by

Nordstrom, Inc. (NYSE:JWN) is scheduled to report Q3 earnings results on November 21, 2019, at 4:45 PM EST. The company is expected to report earnings of $0.65/share on revenue of $3.655 billion. The consensus earnings per share (EPS) of $0.65/share is based on a poll of 20 analysts and represents a decline of -3.0% over the same quarter last year when the company reported earnings of $0.67/share.

The revenue forecast of $3.655 billion based on a poll of 11 analysts implies a year-over-year (YoY) decline of -2.5%. Last year the company reported $3.748 billion in revenue for the quarter.

Expected to report EPS decline of -$0.02/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $3,655.00 $3,748.00 -2.5%
EPS $0.65 $0.67 -3.0%

Management has articulated the company’s strategy as being anchored in what they believe will always matter most to customers — “compelling product & outstanding service backed by people who care.” The company is also attempting to reimagine the shopping experience for the digital world. The three key performance indicators as defined by management are as follows:

  • Continuing market share gains
  • Improving profitability & returns
  • Maintaining disciplined capital allocations

Over the last few quarters, the company’s revenues have declined quarter-over-quarter without significant changes in gross profit margin.

Nordstrom Revenues Gross Margin-Watermarked.pngSource: Finbox

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters, missed 2 quarters, and met expectations 1 quarter. What are your expectations from Nordstrom for earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.76 $0.90 18.4% Beat
Q1, 2020 $0.44 $0.23 -47.7% Missed
Q4, 2019 $1.42 $1.42 0.0% Meet
Q3, 2019 $0.64 $0.67 4.7% Beat
Q2, 2019 $0.84 $0.95 13.1% Beat
Q1, 2019 $0.45 $0.51 13.3% Beat
Q4, 2018 $1.24 $1.20 -3.2% Missed
Q3, 2018 $0.63 $0.67 6.3% Beat

One question we always consider here at the Bankers’ Tribune is how important are earnings reports to Nordstrom’s stock price performance? It’s more important for some companies than for others.

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending August 3, 2019, the stock price reacted by increasing by 22.3%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-21 $25.15 $30.75 22.3% Increase
2019-05-21 $37.46 $34.35 -8.3% Decline
2019-02-28 $47.26 $46.78 -1.0% Decline
2018-11-15 $61.10 $50.93 -16.6% Decline

Fundamentals And Technical Analysis

Nordstrom is currently trading at $34.43/share, up 1.4% for the day. The company is trading at approximately 50.8% of its 52-week high of $67.75/share. The company’s stock price is up 36.9% since the last earnings report and down -8.7% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 64.31 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 11.9x and a forward P/E multiple of 11.3x. Nordstrom’s current share price also implies a price-to-book (P/B) multiple of 7.7x. The following table summarizes some other key fundamental ratios:

Data as of November 21, 2019
Metric Value
Last Fiscal Period FY2020.Q2
Period End Date August 3, 2019
Stock Price (Current) $34.43
P/E Ratio 11.9x
P/E Ratio (Fwd) 11.3x
PEG Ratio -19.2
Total Debt to Capital (%) 45.1%
Levered Free Cash Flow $529 million
Enterprise Value / EBITDA 6.7x

Source: Finbox

Company Profile: Nordstrom, Inc.

Nordstrom, Inc. is a mid-cap stock with a market capitalization of $5.259 billion and a total enterprise value of $9.13 billion. The company operates in the Consumer Discretionary sector and the Multiline Retail industry.

Nordstrom, Inc., a fashion retailer, provides apparel, shoes, cosmetics, and accessories for women, men, young adults, and children. It offers a range of brand name and private label merchandise through various channels, such as Nordstrom branded full-line stores and online store at Nordstrom.com; Nordstrom Rack stores; Nordstromrack.com and HauteLook; Jeffrey boutiques; clearance stores that operate under the Last Chance name; Trunk Club clubhouses and TrunkClub.com; and Nordstrom Locals.

As of October 24, 2019, the company operated 382 stores in 40 states, including 117 full-line stores in the United States, Canada, and Puerto Rico; 249 Nordstrom Rack stores; 3 Jeffrey boutiques; 2 clearance stores; 6 Trunk Club clubhouses; and 5 Nordstrom Local service concepts, as well as online through Nordstrom.com, Nordstromrack.com, HauteLook, and TrunkClub.com.

Nordstrom, Inc. was founded in 1901 and is headquartered in Seattle, Washington.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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