Ross Stores (ROST) Q3 Earnings Growth Expected: Time You Sell?

in EARNINGS/INVESTING IDEAS by

Ross Stores, Inc. (NASDAQGS:ROST) is scheduled to report Q3 earnings results on November 21, 2019, at 4:15 PM EST. The company is expected to report earnings of $0.97/share on revenue of $3.769 billion. The consensus earnings per share (EPS) of $0.97/share is based on a poll of 17 analysts and represents a growth of 6.6% over the same quarter last year when the company reported earnings of $0.91/share.

The revenue forecast of $3.769 billion based on a poll of 21 analysts implies a year-over-year (YoY) growth of 6.2%. Last year the company reported $3.55 billion in revenue for the quarter.

Expected to report EPS growth of $0.06/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $3,769.10 $3,549.61 6.2%
EPS $0.97 $0.91 6.6%

The company defines its demographic as about 70-75% female, shopping for herself and other family members that have reasonably stable household income – “want a bargain” versus “need a bargain.” The company is still focused on store visits as core customers average about two-to-three store visits a month. Management sees significant growth opportunities ahead and aims to grow store base to approximately 3,000 locations in the U.S. over the long-term.

Ross Stores Revenues Gross Margin-Watermarked

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarter. What are your expectations from Ross Stores for earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.11 $1.14 2.5% Beat
Q1, 2020 $1.12 $1.15 2.7% Beat
Q4, 2019 $1.14 $1.13 -0.9% Missed
Q3, 2019 $0.90 $0.91 1.5% Beat
Q2, 2019 $1 $1.04 3.5% Beat
Q1, 2019 $1.07 $1.11 3.7% Beat
Q4, 2018 $0.92 $1.09 18.5% Beat
Q3, 2018 $0.67 $0.72 7.5% Beat

One question we always consider here at the Bankers’ Tribune is how important are earnings reports to Ross Stores’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 falling by -2.6%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-22 $105.70 $102.95 -2.6% Decline
2019-05-23 $94.53 $92.78 -1.9% Decline
2019-03-05 $93.60 $94.43 0.9% Increase
2018-11-20 $91.19 $81.63 -10.5% Decline

Fundamentals And Technical Analysis

Ross Stores is currently trading at $111.44/share, up 0.9% for the day. The company is trading at approximately 97.0% of its 52-week high of $114.83/share. The company’s stock price is up 8% since the last earnings report and down -0.9% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 56.93 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 25.1x and a forward P/E multiple of 24.9x. Ross Stores’ current share price also implies a price-to-book (P/B) multiple of 12.3x. 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) $111.44
P/E Ratio 25.1x
P/E Ratio (Fwd) 24.9x
PEG Ratio 3.4
Total Debt to Capital (%) 7.6%
Levered Free Cash Flow $1.65 billion
Enterprise Value / EBITDA 17.7x

Source: Finbox

Company Profile: Ross Stores, Inc.

Ross Stores, Inc. is a large-cap stock with a market capitalization of $39.95 billion and a total enterprise value of $41.926 billion. The company operates in the Consumer Discretionary sector and Specialty Retail industry.

Ross Stores, Inc. operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd’s DISCOUNTS brands. Its stores primarily offer apparel, accessories, footwear, and home fashions.

The company’s Ross Dress for Less stores sell its products at department and specialty stores primarily to middle-income households, and dd’s DISCOUNTS stores sell its products at department and discount stores regular prices to customers from households with moderate income.

As of October 14, 2019, it operated approximately 1,811 off-price apparel and home fashion stores under the Ross Dress for Less and dd’s DISCOUNTS names in 39 states, the District of Columbia, and Guam.

The company was founded in 1982 and is headquartered in Dublin, California.

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