In a report published Friday, Morgan Stanley analyst Kimberly Greenberger maintained an Overweight rating on Ross Stores Inc ROST, while raising the price target from $93 to $102. The company reported stellar 4Q results, with 6% comps, the best it has reported since 3Q12.
In the report, Morgan Stanley noted, "We see a healthier low end consumer helped by a reduced unemployment rate y/y and lower gas prices boosting ROST sales growth. These factors could benefit the first 2-3 quarters of 2015, in our view."
"Impressive 10.6% 4Q sales growth added 5c EPS upside and helped drive 45 bps SG&A leverage (adding 3c to EPS)," Greenberger reported, while pointing out, "ROST has not missed a quarterly comp or EPS guidance in 7 years."
"Assuming the recently improved consumer trends remain intact, with ROST's track record of stellar execution, we think 2015 easily exceeds the top end of guidance and could deliver +LDD EPS growth again," the analyst wrote.
"Delayed apparel imports should present an incremental opportunity to buy goods at favorable terms; however, packaway goods likely benefit most…Our analysis suggests ROST will see an even larget volume of Spring/Summer goods available for purchase over the next 3 months given the recent work slowdown/stoppage at the ports, which would likely benefit 1H16," Greenberger commented.
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