On Friday, CFRA maintained a Hold rating on shares of Ross Stores, Inc. (NASDAQ:ROST) with a steady price target of $154.00. The firm's analyst upheld the 12-month price target based on a forward price-to-earnings (P/E) multiple that aligns with the company's historical average, taking into account the anticipated benefits from cost-conscious consumers and the ongoing transition from indoor malls to off-price retail formats.
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. The company's operating margin improved by 70 basis points to 11.9% for the quarter, attributed to decreased costs related to incentives, freight, and distribution, despite a lower-than-anticipated merchandise margin.
The retailer has been actively repurchasing shares, with $262 million bought back in the third quarter. It is on course to complete a total of $1 billion in share buybacks for the fiscal year. CFRA expressed approval of Ross Stores' strategic placement in the off-price sector and its consistent expansion through new store openings.
The firm has adjusted its fiscal year 2025 EPS forecast, raising it by $0.15 to $6.15, and its fiscal year 2026 EPS estimate by $0.10 to $6.50. Despite the positive outlook on the company's operations, CFRA believes that the current share price, trading at approximately 23.5 times the firm's fiscal year 2026 EPS estimate, accurately reflects the stock's fair value, leading to their neutral stance.
In other recent news, Ross Stores, Inc. has seen a mix of growth and challenges in its recent financial developments. The company reported third-quarter results for 2024, with total sales rising to $5.1 billion and a 1% increase in comparable store sales. Despite this, Ross Stores faced hurdles including severe weather and high costs, impacting customer spending. Earnings per share for the quarter increased to $1.48, up from $1.33 the previous year, and net income reached $489 million.
In a significant development, CEO Barbara Rentler is set to step down, with Jim Conroy taking over as CEO on February 2, 2025. Looking ahead, Ross Stores anticipates a 2-3% increase in comparable store sales for Q4, with earnings per share expected to be between $1.57 and $1.64. However, a decline in total sales of 1-3% is also expected for the same period.
Evercore ISI raised the price target for Ross Stores to $180 from the previous $170, retaining an Outperform rating on the stock. The firm's analysis highlighted robust margin performance and projected easing merch margin pressure into 2025.
InvestingPro Insights
Ross Stores' financial metrics and market position align closely with CFRA's analysis. According to InvestingPro data, the company's P/E ratio stands at 23.53, which is consistent with CFRA's valuation assessment. This valuation is further supported by an InvestingPro Tip indicating that Ross Stores is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.75 for the last twelve months as of Q2 2025.
The company's strong financial health is evident from its revenue growth of 9.81% and EBITDA growth of 23.11% over the same period. These figures underscore Ross Stores' ability to capitalize on cost-conscious consumers, as mentioned in the CFRA report. Additionally, an InvestingPro Tip highlights that Ross Stores has maintained dividend payments for 31 consecutive years, demonstrating its financial stability and commitment to shareholder returns.
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips on Ross Stores, providing a deeper understanding of the company's market position and financial outlook.
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