Nordstrom, Inc. Just Missed EPS By 7.1%: Here's What Analysts Think Will Happen Next

March 04, 2020

Last week, you might have seen that Nordstrom, Inc. (NYSE:JWN) released its annual result to the market. The early response was not positive, with shares down 6.2% to US$32.88 in the past week. It looks like the results were a bit of a negative overall. While revenues of US$16b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 7.1% to hit US$3.18 per share. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Nordstrom

NYSE:JWN Past and Future Earnings, March 5th 2020

Following last week's earnings report, Nordstrom's 15 analysts are forecasting 2021 revenues to be US$15.8b, approximately in line with the last 12 months. Statutory earnings per share are expected to rise 6.1% to US$3.39. Yet prior to the latest earnings, analysts had been forecasting revenues of US$15.8b and earnings per share (EPS) of US$3.53 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.

It might be a surprise to learn that the consensus price target fell 5.5% to US$37.14, with analysts clearly linking lower forecast earnings to the performance of the stock price. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Nordstrom at US$55.00 per share, while the most bearish prices it at US$27.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that analysts expect Nordstrom's revenue growth will slow down substantially, with revenues next year expected to grow 1.7%, compared to a historical growth rate of 2.9% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 4.1% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Nordstrom to grow slower than the wider market.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Nordstrom. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Nordstrom's revenues are expected to perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Nordstrom going out to 2023, and you can see them free on our platform here..

You can also see whether Nordstrom is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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