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Factors Likely to Impact Nordstrom (JWN) in Q4 Earnings

Zacks Equity Research

Nordstrom, Inc. JWN is scheduled to release fourth-quarter 2018 numbers on Feb 28, after the closing bell. In the last reported quarter, the company delivered positive earnings surprise of 4.7%. Also, the company boasts an impressive earnings surprise history, marking a beat in nine of the last ten quarters. Further, it delivered average earnings beat of 9.3% in the trailing four quarters. Let’s see what’s in store for the company this time around.

How are Estimates Faring?

The Zacks Consensus Estimate for fourth-quarter 2018 earnings is pegged at $1.42, reflecting an increase of 18.3% from $1.20 per share registered in the year-ago quarter. Notably, the consensus mark has beem stable in the past 30 days. For revenues, the consensus mark is estimated at $4,632 million, reflecting a rise of 0.7% from the year-ago quarter’s tally.

Nordstrom, Inc. Price, Consensus and EPS Surprise


Nordstrom, Inc. Price, Consensus and EPS Surprise | Nordstrom, Inc. Quote


Factors Likely to Drive Results

Nordstrom’s robust omni-channel initiatives, including expansion of store as well as digital presence, and impressive surprise history look promising. Nordstrom is focused on the store-expansion strategy in a bid to grow market share and boost the top line. It also emphasizes on boosting presence in the United States and Canada.  Further, the company’s customer-based strategy keeps it on track to achieve long-term revenue target of $20 billion by 2020.

Additionally, Nordstrom is making amendments to its operating model in response to the constant slowdown in mall traffic resulting from customers’ shift to online shopping. Its focus on advancing in the technology space also extends to improving supply-chain channels and marketing efforts. In fact, the company’s third-quarter fiscal 2018 results reflected significant progress on the digital strategy, with growth of 20% in digital sales.

Further, the company’s investments in new markets and digital businesses were impressive and contributed roughly 50% to sales growth through the first nine months of fiscal 2018. In addition, with regard to cost savings, the company plans to strike a balance between sales and expense growth. These factors paint an impressive picture about Nordstrom’s top line in the quarter to be reported.

Backed by these efforts, management earlier projected net sales in the range of $15.5-$15.6 billion, while comps are projected to grow roughly 2% for fiscal 2018. Further, the company expects adjusted EBIT and adjusted earnings per share in the range of $935-$960 million and $3.55-$3.65, respectively.

For fiscal 2018, the Zacks Consensus Estimate for earnings is pegged at $3.56, reflecting an increase of 20.3% year over year. For revenues, the consensus estimate stands at $16.01 billion.

However, the company is battling higher SG&A expenses. The investments related to occupancy, technology, supply chain and marketing expenses have resulted in increased near-term cost. Moreover, rise in supply chain costs, which reflects increased fulfillment and delivery expenses in relation to digital growth, might lead to higher expenses and weigh on margins in the fiscal fourth quarter.

The company’s credit-card interest-related error has hurt investors’ sentiments. Though management expects to refund less than 4% of its cardholders with amounts less than $100, the higher charge may weigh on profitability.

Driven by these headwinds, shares of this Seattle, WA-based company have lost 13.7% compared with the industry’s decline of 7.8% in the past three months.

What our Model Says?

Our proven model does not show that Nordstrom is likely to beat estimates this quarter. A stock needs to have — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) as well as a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Nordstrom has a Zacks Rank #3, its Earnings ESP of -0.55% makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

Zumiez Inc ZUMZ has an Earnings ESP of +0.45% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Eagle Outfitters, Inc AEO has an Earnings ESP of +0.60% and a Zacks Rank #2.

Foot Locker, Inc FL has an Earnings ESP of +2.25% and a Zacks Rank #2.

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