Nordstrom, Inc. (NYSE:JWN) is rolling to end the week. The higher end retailer shares are up more than $8 after topping Wall Street's estimates and putting its $2B credit card receivables portfolio up for sale.
Nordstrom is a fashion specialty retailer, offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States. It operates in two segments, Retail and Credit. The Retail segment offers a selection of brand name and private label merchandise. The Credit segment operates Nordstrom fsb, a federal savings bank, which provides a private label credit card, two Nordstrom VISA credit cards, and a debit card.
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A few brokers upped their opinions and price-targets on the fashion specialty retailer following the well-received announcement.
RBC Capital raised its price target to $75 from $67. The firm says the positive comparable sales trend will continue, which should drive the stock higher.
Meanwhile, over at Credit Suisse, they changed their opinion to "Outperform" from "Neutral" as the analyst believes the credit division sale will unlock earnings growth and push shares to a target of $78.
Seventy-five or seventy-eight, not much of a difference; let's see how likely either target is based on current earnings and sales projections while using recent price-to-earnings (P/E) and price-to-sales (P/S) valuations.
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For the current year, fiscal (FY) 2015, Wall Street forecasts $3.85 in earnings-per-share (EPS) and $4.23 next year. The bottom-line numbers will come compliments of top-line revenue of $13.35 billion this year and $14.43 billion in FY 2016.
Since 2009, JWN carried an average P/E of 16.82, which is a little lower than today's 18.86. According to the calculator, Nordstrom shares would price out at $64.76 and $71.15. The potential targets are based on current consensus EPS estimates for this year and next using the average P/E.
On the sales front, again using the consensus estimates for FY 15 and 16 and average P/S ratio of 0.95, the trusty calculator spits out potential landing spots for JWN of $66.86 and $72.27.
Overall: Likely upward revisions notwithstanding, Nordstrom, Inc. (NYSE:JWN) will need to trade at about a 6% premium versus its average P/E and P/S ratio to hit the $75 mark based on current sales and EPS estimates. However, if sales and earnings accelerate as RBC Capital and Credit Suisse project, then JWN won't have to do any better than average to meet $75 or $78.
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