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Earnings Previews: Nordstrom, Petco, Toll Brothers, Urban Outfitters

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The three major U.S. equity indexes closed lower Friday. The Dow Jones industrials dropped 0.86%, the S&P 500 lost 1.29% and the Nasdaq tumbled by 2.01%. Ten of 11 sectors ended the day with losses, led by consumer cyclicals and financials (down 2.1% and 2.0%, respectively). For the week, the Nasdaq was down 2.6%, the S&P 500 down 1.2% and the Dow slipped by just 0.2%.
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Looking ahead, on Thursday we shall get the second reading on second-quarter gross domestic product, while Friday brings the personal income and spending report. Thursday also marks the beginning of the Federal Reserve’s Jackson Hole retreat, the highlight of which is Chair Jerome Powell’s press conference Friday morning. In the meantime, we can do little but wonder if equities’ gains of the past few weeks will evaporate. All three major indexes were down by about 1% or more in premarket trading Monday.

There were no notable earnings releases after markets closed Friday or before they opened on Monday. Two companies are set to report quarterly results after markets close on Monday: Palo Alto Networks and Zoom Video. First thing Tuesday morning, JD.com, KE Holdings, Macy’s and Medtronic are expected to release quarterly results.

The following four companies will post quarterly results late Tuesday or early Wednesday.

Nordstrom

Shares of department store operator Nordstrom Inc. (NYSE: JWN) have lost about 29% of their value over the past 12 months. Year to date, however, the shares have added about 6.9%, and over the past six months, shares have gained almost 12%. The stock’s 52-week high rolls off later this week, with shares trading nearly 30% above the 52-week low. In late May, the company announced a $500 million share buyback program and a relatively easy comparison with prior year results is also working in the company’s favor. Nordstrom reports after markets close Tuesday.

Analysts are not convinced, however, that Nordstrom is a solid play. Of 22 brokerages covering the stock, 14 have Hold ratings while only three rate the shares at Buy or Strong Buy. At a recent price of around $24.20 a share, the stock trades slightly above its median price target of $24.00. At the high price target of $43.50, the upside potential is nearly 80%.


For the second quarter of fiscal 2023 that ended in July, revenue is forecast at $3.97 billion, which would be up 11.3% sequentially and by 8.5% year over year. Analysts have forecast earnings per share (EPS) of $0.80 for the quarter, compared to a loss of $0.06 per share in the prior quarter and EPS of $0.49 in the year-ago quarter. For the full 2023 fiscal year ending in January, current estimates call for EPS of $3.12, up 107.7%, on sales of $15.82 billion, up almost 7%.

Nordstrom stock trades at 7.8 times expected 2023 EPS, 7.5 times estimated 2024 earnings of $3.21 and 7.6 times estimated 2025 earnings of $3.18 per share. The stock’s 52-week trading range is $18.65 to $38.14. The company pays an annual dividend of $0.76 (yield of 3.1%). Total shareholder return for the past year was negative 27.7%.

Petco

Pet food and supply retailer Petco Health and Wellness Co. Inc. (NASDAQ: WOOF) has dropped nearly 25% of its stock price over the past 12 months. Since reaching a 52-week peak in early November, the stock is down more than 49%. Free cash flow was negative $8.4 million in the prior quarter, the second straight quarter of cash burn after five consecutive periods of positive free cash flow.
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Earlier this month, the company reshuffled its executive deck and named a new chief operating officer to sort out logistics issues. And two weeks ago, a store in Washington became the first to seek union representation. Petco reports results before markets open Wednesday.

Analysts are bullish on the stock. Of 13 brokerages covering it, eight have a Buy or Strong Buy and four have a Hold rating. At a share price of around $15.90, the upside potential based on a median price target of $19.00 is about 19.5%. At the high price target of $30.00, the upside potential is nearly 95%.

For the company’s second quarter of fiscal 2023, analysts are expecting revenue of $1.49 billion, up 1.2% sequentially and 4.2% higher year over year. Adjusted EPS are forecast at $0.22, up 31.7% sequentially but down 12.0% year over year. For the full fiscal year ending in January, EPS are forecast to come in at $0.90, down 0.7%, on sales of $6.12 billion, up 5.4%.

Petco stock trades at 17.6 times expected 2023 EPS, 15.9 times estimated 2024 earnings of $1.00 and 15.0 times estimated 2025 earnings of $1.06 per share. The stock’s 52-week range is $12.88 to $26.21. Petco does not pay a dividend. Total shareholder return for the past year was negative 20.6%.

Toll Brothers

Shares of homebuilder Toll Brothers Inc. (NYSE: TOL) have dropped by 18.4% over the past 12 months. Since posting an all-time high in mid-December, the stock price has fallen by more than 33%. The company caters to affluent buyers who are not sensitive to interest rates, and its performance over the past two quarters has been impressive. Toll Brothers has beaten earnings estimates in 11 or the past 12 quarters, and sales are on track to post a solid gain for the full fiscal year. The report is expected after markets close on Tuesday.

Sentiment on the stock is better than lukewarm, but not exactly bullish. Of 19 brokerages covering the company, nine have a Buy or Strong Buy rating and seven rate the shares at Hold. At a share price of around $47.30, the upside potential based on a median price target of $53.50 is 13.1%. At the high price target of $80.00, the upside potential is more than 69%.
When the company reports third-quarter 2022 results, analysts expect to see revenue of $2.52 billion, up 10.5% sequentially and by 11.5% year over year. Adjusted EPS are forecast at $2.29, up 24% sequentially and 22.5% higher year over year. For the full 2022 fiscal year ending in October, analysts expect EPS of $10.17, up 53.4%, on sales of $10.32 billion, up 17.4%.
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Toll Brothers stock trades at 4.6 times expected 2022 EPS, 4.4 times estimated 2023 earnings of $10.62 and 4.7 times estimated 2024 earnings of $10.16 per share. The stock’s 52-week range is $40.20 to $75.61. The company pays an annual dividend of $0.74 (yield of 1.57%). Total shareholder return for the past year was negative 17.2%.

Urban Outfitters

Specialty retailer Urban Outfitters Inc. (NASDAQ: URBN) has seen its share price tumble by about 39% over the past 12 months. Since reaching a peak almost exactly one year ago, the stock has fallen by more than 45%. Prior-quarter sales rose sharply year over year, but margins and profits were hurt by higher costs for shipping and labor. Margins could get hit again due to inventory clearing. How all this will shape the second half of the year is what investors will want to hear about. The company reports results late on Tuesday.

Analysts are cautious on the stock, with nine of 14 having a Hold rating and the other five rating the stock at Buy. At a share price of around $22.30, the implied upside based on a median price target of $23.50 is 5.4%. At the high target of $36.50, the implied gain is 63.7%.


Second-quarter fiscal 2023 revenue is forecast to come in at $1.18 billion, up 12.5% sequentially and 1.7% year over year. Analysts are forecasting EPS of $0.70, up almost 112% sequentially but down 45.3% year over year. For the full 2023 fiscal year ending in January, analysts currently expect EPS of $2.28, down 27.2%, on sales of $4.8 billion, up 5.6%.

Urban Outfitters stock trades at 9.8 times expected 2023 EPS, 8.6 times estimated 2024 earnings of $2.58 and 7.8 times estimated 2025 earnings of $2.94 per share. The stock’s 52-week range is $17.81 to $41.03. The company does not pay a dividend, and the total shareholder return for the past year was negative 38.9%.

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