4 Retailers Sterne Agee Is Watching In The Heart Of Earnings Season

Sterne Agee issued notes Monday on the four retail stocks its watching ahead of earnings reports.

Analysts led by Charles Grom largely maintain Neutral ratings on the stocks. Below are highlights from the firm’s research notes along with current ratings and price targets.

J C Penney Company Inc JCP - Neutral, no price target.

“With the stock seemingly blowing with the proverbial wind, we find it hard to get involved in JCP these days. Grounding shares to the fundamentals implies intrinsic value of ~$8 considering the $1.2 billion FY17 EBITDA bogey, but JCP has traded in an extraordinary $6-$11 range over a trailing 12 months that has seen a mixed bag of misses, beats, leadership changes, and an accidental comp leak to boot. Ahead of the print, with comp upside pre-announced, the focus turns to: (a) margins and (b) 2QTD trends. Accordingly, recent favorable weather could provide a ST tailwind (May temps up 3.8 degrees YOY in JCP trade areas) . . . but we remain cautious on JCP’s ability to ‘comp the comp’ over a multi-year period provided recent traffic softness.”

The firm modeled an EPS loss of $-0.71 vs. the consensus estimate of a loss of $-0.79. The Estimize consensus was for EPS of $-0.74 on revenue of $2,876 billion.

J C Penney reports Q1 results on May 13.

Related Link: Major Retailers Highlight This Week's Earnings Outlook

Kohl's Corporation KSS - Buy, $85 price target

“Heading into the 1Q print, expectations have ratcheted down, with the comp bar now in the ~3% range (down from ~4%). Certainly, Kohl’s upbeat tone during our Boston NDR (4/7-4/8) provided reasons to be optimistic, but we also appreciate that large-scale turnarounds take time. Accordingly, the reset into the low $70s is not only reflective of realistic 1Q expectations, but also creates a nice entry-point to play: (a) a noticeably improving weather set-up, (b) NT loyalty/beauty/omni fueled SSS momentum, and (c) sustained success into FY16 as KSS cultivates its loyalty/national brands wins. Net, despite a +20% move YTD (vs SPX 2.8%), we think shares continue to grind higher from here.”

The firm modeled EPS of $0.53 vs. the consensus of $0.55. The Estimize consensus was for EPS of $0.60 on revenue of $4.188 billion.

Kohl's reports Q1 results May 14.

Nordstrom, Inc. JWN - Neutral, $70 price target

“Sentiment is mixed, with the stock, like several other department stores, coming off its highs (down ~8% since late March) heading into earnings season. As always, the near-term focus is on comps where we don’t see a major divergence from expectations. That said, the Nordstrom story is almost equally about capital allocation considering a myriad of investments (Canada, Manhattan, Trunk Club, Rack) that has constrained EBIT flow-through for some time. To this end, we don’t see a material change in philosophy here – we stay sidelined accordingly.”

The firm modeled Q1 EPS of $0.74 vs. consensus of $0.71. The Estimize consensus was for EPS of $0.73 on revenue of $3.218 billion.

Nordstrom reports Q1 results May 14.

Macy's, Inc. M - Neutral, $62 price target

“We expect relatively subdued 1Q results from Macy’s, likely matching waning sentiment (and performance) that has taken hold of the stock since reaching its all-time high in early April. Indeed, the market already seems well-attuned to negative implications from M’s early quarter port disruptions and soft March retail sales trends . . . BUT, it would not surprise us to see weather-induced QTD strength called out by CFO Karen Hoguet (May weather has been very favorable), potentially setting an early positive tone for the 1Q earnings season (we've seen this move before).”

The firm modeled Q1 EPS of $0.60, below the consensus of $0.62. The Estimize consensus was for EPS of $0.63 on revenue of $6.374 billion.

Macy's reports Q1 results May 13.