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On Wednesday, Bernstein analysts adjusted their outlook on Ross Stores, Inc. (NASDAQ:ROST), reducing the price target from $165.00 to $163.00 while maintaining a Market Perform rating on the shares. The revision comes as the company faces challenges with customer traffic, which is impacting its earnings growth potential. According to InvestingPro data, Ross Stores currently trades at $135.97, with a market capitalization of $44.86 billion, suggesting the stock is trading near its Fair Value.
The analysts noted that Ross Stores was downgraded earlier this year to Market Perform, anticipating that earnings growth could fall below 10% unless the company implemented new strategies. The forecast for fiscal year 2025 suggests earnings per share (EPS) growth might align with mid-single-digit percentages, which is below earlier expectations. InvestingPro analysis shows the company maintains strong financial health with a GOOD overall rating, supported by revenue growth of 8.54% and a healthy current ratio of 1.57x. Get access to 10+ additional exclusive ProTips and comprehensive financial metrics with InvestingPro.
The new Chief Executive Officer of Ross Stores has outlined plans to initiate fresh marketing and store initiatives to stimulate growth. However, Bernstein analysts have decided to maintain a neutral stance until more details about these strategies are disclosed.
The price target adjustment to $163 reflects a $2 decrease and is based on a 22 times multiple applied to the projected fiscal year 2026 EPS of $7.41, which is a slight decrease from the previous estimate of $7.55. This valuation multiple remains consistent with Bernstein’s previous assessments.
Bernstein’s commentary underscores the current wait-and-see approach as the market anticipates further information on the new CEO’s growth strategies and their potential impact on Ross Stores’ financial performance.
In other recent news, Ross Stores reported its financial results for the fourth quarter of 2024, with earnings per share (EPS) of $1.79, exceeding the forecasted $1.65. However, the company faced a slight shortfall in revenue, reporting $5.91 billion against an anticipated $5.94 billion. Full-year sales rose by 3.4% year-over-year, reaching $21.1 billion, while net income increased by 10.5% to $2.1 billion. Analysts have been adjusting their outlooks on Ross Stores following these results. Telsey Advisory Group reduced its price target to $150, citing sales and gross margin concerns but noted better-than-expected expense management. Jefferies also cut its price target to $145, maintaining a neutral stance due to concerns about future performance despite strong fourth-quarter comparable store sales. BMO Capital Markets lowered its price target to $156, yet maintained an Outperform rating, highlighting the company’s reduction in selling, general, and administrative expenses. Citi adjusted its price target to $146, noting a slowdown in trends towards the end of January and into February, with guidance for the first quarter being conservative. Ross Stores’ management has projected comparable store sales growth ranging from -1% to +2% for fiscal 2025, reflecting a cautious approach amid macroeconomic uncertainties.
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