Is Ross Stores (ROST) Poised for an Earnings Beat in Q1?

Ross Stores, Inc. ROST is scheduled to release first-quarter fiscal 2022 results on May 19. The off-price retailer of apparel and home accessories is likely to have witnessed revenue growth in the to-be-reported quarter.

The Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $4.54 billion, indicating growth of 0.5% from the figure reported in the year-ago quarter. For fiscal first-quarter earnings, the consensus mark of 99 cents per share suggests a decline of 26.1% from the year-ago quarter's reported number. The consensus mark has been unchanged in the past 30 days.

In the last reported quarter, Ross Stores delivered an earnings surprise of 7.2%. It has delivered an earnings beat of 33.3%, on average, in the trailing four quarters.

Ross Stores, Inc. Price and EPS Surprise

Ross Stores, Inc. Price and EPS Surprise

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

Key Factors to Note

Ross Stores has been witnessing robust customer demand, aiding the top line. Sales in the fiscal first quarter are likely to have benefited from broad-based growth across merchandise categories and regions, as well as robust comparable store sales. Sales are also expected to have gained from robust trends at the dd's DISCOUNTS business.

On its last reported quarter’s earnings call, Ross Stores stated that the ongoing strength in consumer demand would likely continue despite the uncertainty regarding supply-chain woes. The company expected to gain market share due to the increased retail closures and bankruptcies in recent months.

Ross Stores has been consistent with the execution of its store expansion plans, which is likely to have aided the top line. The company's store-expansion efforts are focused on continually increasing penetration in the existing, as well as new markets. The first-quarter fiscal 2022 performance is anticipated to have gained from the company’s return to normal store opening targets. Gains from new stores are expected to get reflected in the company's sales for the fiscal first quarter.

However, Ross Stores has been witnessing the effects of the worsening of the industry-wide supply-chain congestion, which has been leading to higher freight costs and distribution expenses. This is likely to have partly impacted the company’s cost of goods sold rate in the fiscal first quarter. Higher domestic freight expenses and distribution costs mainly on the ongoing supply-chain headwinds and higher wages are likely to have weighed on earnings in the to-be-reported quarter.

On the last reported quarter's earnings call, Ross Stores anticipated continued impacts from the industry-wide supply-chain dynamics and other risks from inflation, as well as costs within its business to hurt the fiscal first-quarter performance.

Ross Stores anticipates comps to be down 2-4% for first-quarter fiscal 2022 compared with 13% growth reported in first-quarter fiscal 2021. Sales are expected between a decline of 2% and growth of 1% from the prior-year period’s reported figure. ROST expects earnings per share of 93-99 cents per share compared with earnings of $1.34 reported in first-quarter fiscal 2021.

The company expects an operating margin of 10.2-10.6% for the fiscal first quarter, down from 14.2% reported in the prior-year quarter. The operating margin is expected to be affected by a negative comp forecast, and elevated freight and wage expenses. The company anticipates interest expenses of $19 million for first-quarter fiscal 2022.

Zacks Model

Our proven model conclusively predicts an earnings beat for Ross Stores this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Ross Stores has a Zacks Rank #2 and an Earnings ESP of +1.24%.

Other Stocks With Favorable Combination

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

Costco Wholesale COST currently has an Earnings ESP of +1.90% and a Zacks Rank of 2. The company is likely to register an increase in the top line when it reports third-quarter fiscal 2022 numbers. The consensus mark for COST’s quarterly earnings has moved up 0.7% in the past 30 days to $3.04 per share. The consensus estimate suggests 10.6% growth from the year-ago quarter’s reported number.

Costco's top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $51.8 billion, which suggests a rise of 14.3% from the figure reported in the prior-year quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Fastenal FAST currently has an Earnings ESP of +2.15% and a Zacks Rank of 2. The company is likely to register an increase in the top and bottom lines when it reports first-quarter fiscal 2022 results. The consensus mark for FAST’s quarterly revenues is pegged at $1.78 billion, which suggests a rise of 18.3% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for earnings has been unchanged at 50 cents per share in the past 30 days. The consensus estimate indicates 19.1% growth from 42 cents reported in the year-ago quarter.

Designer Brands DBI currently has an Earnings ESP of +4.35% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports first-quarter fiscal 2022 earnings. The consensus mark for DBI’s quarterly revenues is pegged at $806.7 million, which suggests 14.7% growth from the figure reported in the prior-year quarter.

The consensus mark for quarterly earnings has moved up by a penny in the past 30 days to 23 cents per share. The consensus estimate for DBI suggests growth of 91.7% from the year-ago quarter.

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