Nordstrom - Momentum Stock Buy

Nordstrom Inc. (JWN) continues to trade near its 52-week high on the heels of better than expected Q3 results.

Company Description

Nordstrom, Inc operates as a specialty fashion retailer for men, woman and children in the United States. The company was founded in 1901 and has a market cap of $7.38 billion.

The retail sector has been weak for the last year as consumers continue to struggle with overbearing debt and high unemployment. But in spite of the challenges shares of Nordstrom have posted big gains as the company adjusts to the challenging environment. This dynamic showed up on Nov 13 when Nordstrom posted better than expected third-quarter results.

Third-Quarter Results

Same-store sales were down 1.2% from last year, but net sales were up 3.5% to $1.87 billion. Earnings came in one penny ahead of the Zacks Consensus Estimate at 38 cents per share. The company has beat in each of the last four quarters by an average of 3 cents, or 8%.

Nordstrom noted that its Nordstrom Rack store, a value oriented extension of the its main store, saw increased demand, with same-store sales up 3% from last year. The company also noted that its 90 basis point expansion in gross margin was largely offset by a jump in performance related compensation.

Estimates Rising

The good quarter pushed estimates higher. The current-year estimate is up 6 cents in the last week to $1.82, while the next-year estimate is up 9 cents to $2.17, a 19% growth projection.

Valuation

Based upon the current-year estimate, this stock trades with a P/E multiple of 18X, a slight premium to the overall market.

The Chart

Shares of JWN are up big over the last 4 months after bottoming out just above $18 in early July. Shares have been hovering near the 52-week high for the last few weeks ahead of prime-time holiday spending season.

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