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Factors Likely to Influence Ross Stores' (ROST) Q1 Earnings

Zacks Equity Research

Ross Stores, Inc. ROST is slated to report first-quarter fiscal 2019 results on May 23.

Notably, the company has an impressive earnings surprise history, having surpassed estimates for 11 straight quarters now. Also, it posted a trailing four-quarter average beat of 3.8%.

The Zacks Consensus Estimate for first-quarter earnings is pegged at $1.12, indicating a 0.9% rise from the year-ago quarter reported figure. Notably, estimates witnessed upward revisions over the past 30 days. For revenues, the consensus mark stands at $3.80 billion, implying 6% growth from the prior-year quarter number.

Ross Stores, Inc. Price and EPS Surprise

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

Ross Stores, Inc. price-eps-surprise | Ross Stores, Inc. Quote

Factors at Play

Ross Stores has been consistently gaining from its store-expansion plans, which is likely to continue in the quarter to be reported. Impressively, the company completed its planned store openings for first-quarter fiscal 2019 by introducing 28 new stores in February and early March. This includes 22 Ross and six dd’s DISCOUNTS stores. Its store expansion efforts are focused on continually increasing penetration in the existing as well as new markets.

In addition, Ross Stores continues to focus on merchandising organization through investments in workforce, processes and technology to keep itself on the growth trajectory. Moreover, the company’s off-price business model offers strong value proposition and micro-merchandising that boost better product allocation and margins.

In fact, the company’s bottom line is fueled by ongoing success in delivering broad assortments of compelling bargains to value-focused customers. Meanwhile, broad-based strength across major merchandise categories and robust comparable store sales (comps) growth are aiding its top line. We expect its solid growth endeavors including better price management, merchandise initiatives, cost containment and store-expansion plans to boost the company’s performance in the quarter to be reported.

However, management had issued a soft view for the fiscal first quarter, when it reported fourth-quarter fiscal 2018 results. It expects softness in the ladies apparel business during the holiday season to continue in the quarter to be reported. This is likely to impact comps for the quarter, which is estimated to be flat to up 2%. Sales are expected to increase 3-6%. Further, operating margin is projected at 13.4-13.8%. Earnings per share are envisioned to be in the $1.05-$1.11 range.

Furthermore, higher freight and wage-related investments have been hurting Ross Stores' margins for a while now. Management expects headwinds related to higher freight costs and wage investments to persist throughout fiscal 2019. This remains a concern in the quarter to be reported.

What the Zacks Model Unveils

Our proven model conclusively shows that Ross Stores is likely to beat estimates in first-quarter fiscal 2019. 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.

Ross Stores has Earnings ESP of +0.77% and Zacks Rank #3, which make us confident of earnings beat.

Other Stocks Poised to Beat Earnings Estimates

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

Abercrombie & Fitch Co. ANF has an Earnings ESP of +2.76% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation COST has an Earnings ESP of +1.83% and a Zacks Rank #3.

Dollar Tree, Inc. DLTR has an Earnings ESP of +0.51% and a Zacks Rank #3.

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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
 
Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
 
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
 
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
 
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