On Friday, BofA Securities reaffirmed their positive stance on Ross Stores, Inc. (NASDAQ: NASDAQ:ROST), maintaining a Buy rating and a price target of $180.00. The firm's assessment follows Ross Stores' third-quarter earnings report, which revealed earnings per share (EPS) of $1.48. This figure surpassed both the analyst's expectation and the Visible Alpha consensus estimates, which were $1.35 and $1.39, respectively. The better-than-expected gross margin was a significant factor in overcoming weaker sales figures.
Comparable store sales (comps) saw a modest increase of 1%, which was below the company's guidance of 2-3% and the analyst's projection of 2%. The shortfall in comps was attributed to unfavorable weather conditions, which had an estimated negative impact of 100 basis points. Despite this, management has raised its full-year 2024 EPS guidance to a range of $6.10 to $6.17, up from the previous forecast of $6.00 to $6.13, reflecting the third-quarter performance.
In response to the earnings beat and Ross Stores' ongoing success in executing their merchandising strategies, BofA Securities has adjusted its full-year 2024 EPS estimate slightly upward by 1% to $6.14. The price objective of $180 remains unchanged, which the analyst justifies by applying a multiple of 28 times the forecasted fiscal 2025 EPS.
Ross Stores continues to attract consumers with its value-oriented offerings, a critical factor as shoppers face economic pressures. The company's ability to navigate a challenging retail environment and deliver results above expectations has reinforced the confidence of BofA Securities in their investment thesis. The updated EPS guidance by management underscores the company's positive outlook and commitment to maintaining momentum.
In other recent news, Ross Stores reported third-quarter earnings per share (EPS) of $1.48, surpassing the consensus estimate by $0.11, and revenue of $5.1 billion, slightly under the expected $5.175 billion. CFRA maintained a Hold rating on Ross Stores, citing the company's strategic placement in the off-price sector and its consistent expansion through new store openings. Evercore ISI, on the other hand, retained an Outperform rating on the stock and raised the price target to $180, highlighting robust margin performance and projected easing merchandise margin pressure into 2025.
The retailer has been actively repurchasing shares, with $262 million bought back in the third quarter, and is on course to complete a total of $1 billion in share buybacks for the fiscal year. In the wake of these developments, Ross Stores is anticipating a 2-3% increase in comparable store sales for Q4, with earnings per share expected to be between $1.57 and $1.64.
In a significant shift, CEO Barbara Rentler is set to step down, with Jim Conroy taking over as CEO in early 2025. Despite facing challenges such as severe weather and high costs, Ross Stores remains committed to refining its brand strategy and merchandise mix.
InvestingPro Insights
Ross Stores' recent performance aligns with several key metrics and insights from InvestingPro. The company's P/E ratio of 23.68 and PEG ratio of 0.75 suggest that it's trading at a reasonable valuation relative to its earnings growth, supporting BofA Securities' bullish stance. This is further reinforced by an InvestingPro Tip indicating that Ross Stores is "Trading at a low P/E ratio relative to near-term earnings growth."
The company's financial health appears robust, with an InvestingPro Tip noting that "Cash flows can sufficiently cover interest payments." This financial stability is crucial as Ross Stores continues to execute its merchandising strategies effectively, as mentioned in the article.
Additionally, Ross Stores has demonstrated consistent shareholder value, having "maintained dividend payments for 31 consecutive years" according to another InvestingPro Tip. This long-term commitment to dividends aligns with the company's ability to navigate challenging retail environments and deliver results above expectations, as highlighted in the article.
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for Ross Stores, providing a deeper understanding of the company's financial position and market performance.
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