The earnings calendar shows that we’re closer to the beginning of next season (Alcoa [NYSE: AA] reports on April 11) than the meat of last season. Just two big names — FedEx (NYSE: FDX) and Nike (NYSE: NKE) — highlight this week’s offerings. That means it’s time to do some digging. Here’s what we found …
It’s Ross Stores (NASDAQ: ROST), the discount department store chain that reports earnings Thursday morning. Analysts expect a modest 18% increase in year-over-year profits, which is quite a bit below the average of more than 40% posted over the past four quarters.
The amazing thing about ROST is that analysts have been spot on with their forecasts. In fact, the actual number has met the estimate for an unheard-of eight straight quarters. The last miss came in November, 2005.
The stock has done well after the previous four reports, gaining ground in the two weeks following each release. That bodes well for the stock, which has been locked between the 70 and 72 levels for the past month. A post-earnings boost is just what the shares need to break out to a new all-time high.
Ross Stores (NASDAQ: ROST)
Sentiment toward ROST is mixed, although just five of 17 covering analysts rate the stock a “buy.” That seems rather low for a stock that has more than tripled off its November 2008 low. A couple of upgrades would do wonders and help the shares break out of their current range.
ROST is doing well even as the economy emerges from the recessionary shadows, as February same-store sales numbers topped the analyst estimate. Price conscious customers appear to still flock to discounts, which has ROST sitting in a retailing sweet spot.
Look for ROST’s prolonged uptrend to continue after earnings. The stock may not get a huge pop after reporting, but should eventually break out to new highs. Give the move some time by playing the ROST April 70 Call for $3 or less.
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