Ross Stores stock holds steady ahead of Q2 earnings, UBS says

Investing.com - UBS has reiterated its Neutral rating and $144.00 price target on Ross Stores, Inc. (NASDAQ:ROST) ahead of the retailer’s second-quarter earnings report. According to InvestingPro data, the stock is currently trading near Fair Value levels, with analysts’ targets ranging from $127 to $175.

UBS believes Ross Stores is positioned to deliver a modest earnings beat of approximately 2 cents per share compared to Wall Street’s expectation of $1.53 per share, based on channel checks indicating "decent sales momentum" during the second quarter. The company has demonstrated strong financial health, maintaining a healthy current ratio of 1.55 and generating over $1.6 billion in levered free cash flow over the last twelve months.

The investment firm anticipates Ross Stores will likely refrain from reinstating its fiscal year 2025 guidance due to ongoing tariff uncertainty, though if guidance is provided, UBS projects earnings per share of $6.00-$6.30 compared to the Street’s consensus of $6.19.

UBS suggests that investor expectations are already aligned with these projections, making it unlikely that the earnings report will significantly impact analyst estimates or the stock’s price-to-earnings ratio.

The options market is pricing in a potential 5.6% move in either direction following the earnings announcement, slightly higher than the historical average movement of 4.8%, with UBS noting that uncertainty around guidance creates "a wide range of potential volatility outcomes."

In other recent news, Ross Stores, Inc. has entered into a new $1.3 billion senior unsecured revolving credit facility, replacing a previous agreement. This facility, effective until June 2030, includes a $300 million sublimit for standby letters of credit and allows for an increase of up to $700 million, pending lender commitment. Jefferies has upgraded Ross Stores’ stock rating from Hold to Buy, citing a wide valuation gap compared to peers and significant margin opportunities, while raising the price target to $150. TD Cowen has maintained its Buy rating with a $161 price target, noting positive customer traffic trends. UBS continues to hold a Neutral rating with a $144 target, forecasting a 4.5% compound annual growth rate for earnings per share over the next five years. These developments highlight the company’s strategic financial maneuvers and the varying analyst perspectives on its future performance.

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