Investing
Time to Buy Stock in These Highly-Ranked Retail Stores
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Several retail apparel stores are starting to stand out landing spots on the Zacks Rank #1 (Strong Buy) list.
Checking boxes that investors look for in regard to growth, valuation, or momentum, let’s take a look at three of these highly ranked retail stocks.
Dillard’s DDS: After blasting Q2 earnings expectations earlier in the month Dillard’s stock has become more attractive.
Second-quarter EPS of $7.98 was astonishing with the popular department store chain beating estimates of $4.21 a share by 89%. Dillard’s stock currently has an “A” Zacks Style Scores grade for Momentum with the Q2 earnings beat mostly attributed to robust sales, improved margins, and lower expenses.
What makes Dillard’s stock most compelling at the moment is its “A” Zacks Style Score for Value. To that point, Dillard’s stock trades at just 8.6X forward earnings which is roughly on par with its industry average and a very attractive discount to the S&P 500’s 20.6X.
Now looks like a good time to buy with many analysts starting to raise their price targets and Dillard’s recently bumped its quarterly dividend by 25% to $0.25 a share.
Ross Stores ROST: Also surpassing Q2 earnings expectations a few weeks ago, Ross Stores displayed its effective niche as an off-price apparel retailer in heavily populated urban and suburban areas.
Earnings of $1.32 per share beat Q2 estimates of $1.17 a share by 13%. Ross Stores stock also has an “A” Zacks Style Scores grade for Momentum with a long list of analysts raising their price targets. It’s noteworthy that the current Average Zacks Price Target offers 8% upside from current levels.
Furthermore, Ross Stores’ bottom line is still expanding landing the company a “B” Style Scores grade for Growth.
Annual earnings are now projected to climb 18% in Ross Stores’ current fiscal 2024 and jump another 10% in FY25 to $5.71 per share. Along with steady growth, Ross Stores offers investors a respectable 1.13% annual dividend yield.
Urban Outfitters URBN: At the moment Urban Outfitters stock checks all the trading boxes with an overall “A” VGM Zacks Style Scores grade for the combination of Value, Growth, and Momentum.
Urban Outfitters has become a fashionista for Generation Z, with the younger demographic being a catalyst for the company’s growth. Offering trendy fashion apparel and accessories, Urban Outfitters crushed Q2 EPS estimates by 23% last Tuesday with earnings coming in at $1.10 per share compared to expectations of $0.89 a share.
More impressive, annual earnings are now projected at $3.18 per share in Urban Outfitters’ current FY24 which would be an 82% increase from FY23 EPS of $1.75. Plus, FY25 earnings are expected to rise another 6%.
Intriguingly, investors aren’t paying a premium for Urban Outfitters’ expansive growth with URBN shares trading at a 10.4X forward earnings multiple. In fact, this is a nice discount to the benchmark and its own industry average of 16.1X.
Analysts have also started to raise their price targets for Urban Outfitters stock and the current Average Zacks Price Target offers 17% upside from current levels.
Bottom Line
After impressive earnings beats this month, EPS estimates have trended higher for these retail stocks which correlates with their Zack Rank #1 (Strong Buy). This has also led to analysts raising their price targets for Dillard’s, Ross Stores, and Urban Outfitters stock reconfirming that now may be an ideal time to buy.
Dillard’s, Inc. (DDS): Free Stock Analysis Report
Ross Stores, Inc. (ROST): Free Stock Analysis Report
Urban Outfitters, Inc. (URBN): Free Stock Analysis Report
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