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Nordstrom Hits 52-Week High: Are Q2 Results the Sole Factor?
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Shares of Nordstrom, Inc. (JWN - Free Report) reached a 52-week high of $62.74, before closing the session a tad lower at $62.06 on Aug 24. The stock got a major boost following the company’s impressive performance in second-quarter fiscal 2018. Following the earnings outcome, shares of this Seattle, WA-based based company surged 18.7%. Moreover, the company’s recent announcement of a $1.5-billion share repurchase program might have helped the stock to propel.
Not to forget, the company’s focus on store expansion and strengthening capabilities through investments, particularly in digital growth, remains noteworthy. Nordstrom has rallied 26.9%, outperforming its industry’s and S&P 500 index’s growth of 10.3% and 5.9%, respectively, in the past three months.
Given its Value Score of A, undoubtedly there is room for the stock to run. Nordstrom with a price to sales ratio of 0.7 compared with that of industry’s 3.5 indicate that the stock has enough upside potential. A more-or-less similar picture emerges when comparing EV/EBITDA ratios. Nordstrom holds the edge here with an EV/EBITDA ratio of 7.2 lower than 11.7 for the industry.
Moreover, impressive estimate revision trend for the current and next fiscal year buoys optimism. Over the past 30 days, the Zacks Consensus Estimate has moved up by 12 cents and 14 cents to $3.57 and $3.70, respectively.
Nordstrom continued its impressive surprise history in second-quarter fiscal 2018, marking its eighth earnings beat in nine quarters and fourth positive sales surprise in five quarters. Both the metrics also improved on a year-over-year basis. Earnings gained from higher sales, lower effective tax rate and gains from the new revenue recognition standard, which relates to the timing of the Anniversary Sale. Meanwhile, top-line results benefited from a favorable shift of roughly 100 basis points thanks to the new revenue recognition standard.
Following the solid quarterly results, management raised its guidance for the remainder of fiscal 2018. Net sales are now projected in the band of $15.4-$15.5 billion, up from $15.2-$15.4 billion, guided earlier. Further, the company expects higher EBIT compared with the previous guidance. Management expects the third and fourth quarter to contribute roughly 30% and 70% to EBIT, respectively. As a result, earnings per share are now envisioned in the band of $3.50-$3.65 for fiscal 2018 over the prior guidance of $3.35-$3.55.
Strategies Well on Track
Nordstrom’s significant progress on customer-based strategy is commendable. Also, it is on track to reach long-term revenue of $20 billion by 2020. Furthermore, the company is making amendments to its operating model in response to the constant slowdown in mall traffic resulting from customers’ shift to online shopping. It is executing its strategy of enhancing market share through persistent store expansion and strengthening capabilities through investments, particularly in digitalization.
The company is concentrating on e-commerce and digital networks, improving supply-chain channels and marketing efforts as well. During the second quarter, digital sales improved 23% year over year. Further, digitally-enabled sales contribution increased to 34% in the reported quarter.
Additionally, the company’s consistent focus on the store-expansion strategy as part of its efforts to grow market share is impressive. Nordstrom also remains keen on prioritizing its investments in the top North American markets.
So far in fiscal 2018, it opened eight and closed two stores besides relocating a store. The company intends to open three new stores in fall 2018. Overall, Nordstrom envisions a $1 billion sales opportunity from its expansion in Canada by 2020, including six planned full-line stores and 15 Rack stores. It remains keen on domestic store expansion as well.
Bottom Line
Though concerns regarding margins cannot be ignored, Nordstrom’s ongoing strategies provide visibility for growth in the future. Nordstrom, which has a long-term earnings growth rate of 6%, carries a Zacks Rank #3 (Hold).
Urban Outfitters, Inc. (URBN - Free Report) came up with an average positive earnings surprise of 17.7% in the trailing four quarters. It has a long-term earnings growth rate of 12% and a Zacks Rank #2 (Buy).
Buckle, Inc. (The) (BKE - Free Report) delivered an average positive earnings surprise of 8.2% in the trailing four quarters. The company carries a Zacks Rank of 2.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Nordstrom Hits 52-Week High: Are Q2 Results the Sole Factor?
Shares of Nordstrom, Inc. (JWN - Free Report) reached a 52-week high of $62.74, before closing the session a tad lower at $62.06 on Aug 24. The stock got a major boost following the company’s impressive performance in second-quarter fiscal 2018. Following the earnings outcome, shares of this Seattle, WA-based based company surged 18.7%. Moreover, the company’s recent announcement of a $1.5-billion share repurchase program might have helped the stock to propel.
Not to forget, the company’s focus on store expansion and strengthening capabilities through investments, particularly in digital growth, remains noteworthy. Nordstrom has rallied 26.9%, outperforming its industry’s and S&P 500 index’s growth of 10.3% and 5.9%, respectively, in the past three months.
Given its Value Score of A, undoubtedly there is room for the stock to run. Nordstrom with a price to sales ratio of 0.7 compared with that of industry’s 3.5 indicate that the stock has enough upside potential. A more-or-less similar picture emerges when comparing EV/EBITDA ratios. Nordstrom holds the edge here with an EV/EBITDA ratio of 7.2 lower than 11.7 for the industry.
Moreover, impressive estimate revision trend for the current and next fiscal year buoys optimism. Over the past 30 days, the Zacks Consensus Estimate has moved up by 12 cents and 14 cents to $3.57 and $3.70, respectively.
Let’s Introspect.
Impressive Q2 Results & Upbeat View Builds Confidence
Nordstrom continued its impressive surprise history in second-quarter fiscal 2018, marking its eighth earnings beat in nine quarters and fourth positive sales surprise in five quarters. Both the metrics also improved on a year-over-year basis. Earnings gained from higher sales, lower effective tax rate and gains from the new revenue recognition standard, which relates to the timing of the Anniversary Sale. Meanwhile, top-line results benefited from a favorable shift of roughly 100 basis points thanks to the new revenue recognition standard.
Following the solid quarterly results, management raised its guidance for the remainder of fiscal 2018. Net sales are now projected in the band of $15.4-$15.5 billion, up from $15.2-$15.4 billion, guided earlier. Further, the company expects higher EBIT compared with the previous guidance. Management expects the third and fourth quarter to contribute roughly 30% and 70% to EBIT, respectively. As a result, earnings per share are now envisioned in the band of $3.50-$3.65 for fiscal 2018 over the prior guidance of $3.35-$3.55.
Strategies Well on Track
Nordstrom’s significant progress on customer-based strategy is commendable. Also, it is on track to reach long-term revenue of $20 billion by 2020. Furthermore, the company is making amendments to its operating model in response to the constant slowdown in mall traffic resulting from customers’ shift to online shopping. It is executing its strategy of enhancing market share through persistent store expansion and strengthening capabilities through investments, particularly in digitalization.
The company is concentrating on e-commerce and digital networks, improving supply-chain channels and marketing efforts as well. During the second quarter, digital sales improved 23% year over year. Further, digitally-enabled sales contribution increased to 34% in the reported quarter.
Additionally, the company’s consistent focus on the store-expansion strategy as part of its efforts to grow market share is impressive. Nordstrom also remains keen on prioritizing its investments in the top North American markets.
So far in fiscal 2018, it opened eight and closed two stores besides relocating a store. The company intends to open three new stores in fall 2018. Overall, Nordstrom envisions a $1 billion sales opportunity from its expansion in Canada by 2020, including six planned full-line stores and 15 Rack stores. It remains keen on domestic store expansion as well.
Bottom Line
Though concerns regarding margins cannot be ignored, Nordstrom’s ongoing strategies provide visibility for growth in the future. Nordstrom, which has a long-term earnings growth rate of 6%, carries a Zacks Rank #3 (Hold).
Interested in Retail? Three Picks You Can’t Miss
Boot Barn Holdings, Inc. (BOOT - Free Report) pulled off an average positive earnings surprise of 31.8% in the trailing four quarters and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Urban Outfitters, Inc. (URBN - Free Report) came up with an average positive earnings surprise of 17.7% in the trailing four quarters. It has a long-term earnings growth rate of 12% and a Zacks Rank #2 (Buy).
Buckle, Inc. (The) (BKE - Free Report) delivered an average positive earnings surprise of 8.2% in the trailing four quarters. The company carries a Zacks Rank of 2.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>