Wedbush Recommends These 2 Retailers Ahead Of Q4 Prints

In a report published Monday, Wedbush analyst Morry Brown suggested that Express, Inc. EXPR and Ross Stores, Inc. ROST are top picks heading into retail earnings season.

"With retail seeing multiple cross currents (lower gas prices, a better consumer spending environment, lower raw materials cost, FX pressures and some regional weather challenges QTD in 1Q), we highlight Express and Ross Stores as our top picks into retail earnings season," Brown wrote. "We expect extensive discussion around these topics from all retailers, with near-term interest likely focused on commentary around weather and its impact on QTD trends, along with developments at the West coast ports."

Related Link: Earnings Expectations For The Week: Retailers On Parade

Express: Easy Q1 Compares To Boost Shares

Brown recommended buying shares of Express as investor focus will hinge entirely on the company's first quarter guidance. The analyst noted that nearly all specialty apparel retailers lap easy comparisons in the first quarter and Express laps the easiest comparisons in the entire sector.

Ross Stores: Magnitude Of Upside Not Fully Captured

Brown argued that Ross Stores will report a strong earnings beat in its fourth quarter print and expects the company to earn $1.14 per share, which stands $0.03 above consensus estimates and $0.05 above the top end of management's guidance range.

Brown also added that the market "clearly factors" some earnings per share upside versus management guidance, but the analyst believes the magnitude of upside is "not fully captured."

The analyst's upside to earnings per share assumes the company maintains its two-year stack trend from the third quarter, to post a 4 percent or more comp in the quarter.

Analyst Ratings

Shares of Express are Overweight rated with a $17 price target.

Shares of Ross Stores are Overweight rated with a $106 price target.