On Friday, BofA Securities maintained a positive outlook on Ross Stores, Inc. (NASDAQ: NASDAQ:ROST), reiterating a Buy rating and a $170.00 price target. The firm's analyst acknowledged Ross Stores' strong performance, noting that the company's improved value proposition is gaining traction with consumers who are feeling the pinch of a tight budget.
Ross Stores reported first-quarter earnings per share (EPS) of $1.46, surpassing both the analyst's and the Visible Alpha consensus estimates, which stood at $1.32 and $1.35, respectively. This beat was attributed to better sales and gross margin.
Comparable store sales (comps) rose by 3%, which was at the high end of the company's guidance of 2-3%. The increase was primarily driven by customer traffic. Despite the costs associated with enhancing the company's value offering, Ross Stores managed to report a strong margin. Management has responded to the better-than-expected performance by raising the full-year 2024 EPS guidance by 2%, setting the new range between $5.79 and $5.98, while maintaining the comp sales growth forecast of 2-3%.
For the second quarter, management anticipates comparable sales to continue at the rate of 2-3%, aligning with consensus expectations. Operating margin (OM) is projected to be between 11.5% and 11.8%, which would represent an approximate 40 basis point improvement year-over-year at the midpoint. In light of these results, BofA Securities has increased its full-year 2024 and 2025 EPS estimates for Ross Stores by 1% each, to $5.93 and $6.49 respectively, reflecting confidence in the company's ongoing ability to execute its pricing strategies effectively.
The $170 price objective set by BofA Securities remains unchanged and is based on 26 times the firm's 2025 estimated earnings per share for Ross Stores. This valuation highlights the firm's continued optimism about the retailer's financial prospects in the coming years.
InvestingPro Insights
As Ross Stores, Inc. (NASDAQ: ROST) continues to exceed expectations with its robust financial performance, a glance at the InvestingPro Insights reveals additional layers of the company's stability and potential for investors. With a market capitalization of $44.21 billion and a P/E ratio that stands at 23.64, Ross Stores is not only a heavyweight in the Specialty Retail industry but also trades at a valuation that suggests a balance between its earnings and stock price.
Key metrics such as a revenue growth of nearly 9% in the last twelve months as of Q4 2024 and a solid operating income margin of 11.32% are testaments to the company's operational efficiency and its ability to translate sales into profits. Additionally, an attractive dividend yield of 1.11%, coupled with a history of raising dividends for 31 consecutive years, underscores Ross Stores' commitment to shareholder returns.
Investors looking to delve deeper can find further analytical insights and detailed metrics on Ross Stores by exploring InvestingPro. With 12 additional InvestingPro Tips available, including the company's low price volatility and its capacity to cover interest payments comfortably, there's a wealth of information for those seeking a more comprehensive investment analysis. For those interested in a subscription, use the exclusive coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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