Deutsche Bank: Nordstrom's Capital Spending Will Pay Off In FY16

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Nordstrom, Inc.'s JWN capital spending will hit a peak in 2015 and result in faster earnings growth during subsequent years, an analyst said Friday.

The retailer's shares gained more than 5 percent Friday to $81.37, despite missing a fourth-quarter profit consensus and offering a weaker-than-expected outlook.

But Deutsche Bank's Paul Trussell maintained a Buy rating and said a new wave of spending unveiled Thursday will help drive compounded annual sales growth of more than 7 percent during the next five years.

Spending in 2015 will "lead to stronger earnings growth ahead," Trussell said.

Moreover, Nordstrom's 4.7 percent same-stores sales growth in the recent fourth quarter suggests that its forecast for 2015 is "quite conservative," Trussell said.

Nordstrom predicts 2015 same-store sales will increase between 2 percent and 4 percent.

Yet the lower-than-expected earnings outlook spurred Trussell to shave a dollar off his price target, bringing it to $82 a share.

Despite the stock's performance Friday, analysts are generally bearish on Nordstrom, with 20 out of 31 tracked by FactSet maintaining a Hold rating.

Eight analysts rate the shares at Buy, two are at Underweight or Sell and one is at Underweight.

Analysts' average target price is $76.96 a share for Nordstrom.

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Posted In: Analyst ColorPrice TargetReiterationAnalyst RatingsDeutsche BankPaul Trussell
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