Earnings Previews: Nordstrom, Petco, Toll Brothers, Urban Outfitters

Pet food and supply retailer Petco Health and Wellness Co. Inc. (NASDAQ: WOOF) has dropped nearly 25% of its stock price over the past 12 months. Since reaching a 52-week peak in early November, the stock is down more than 49%. Free cash flow was negative $8.4 million in the prior quarter, the second straight quarter of cash burn after five consecutive periods of positive free cash flow.

Earlier this month, the company reshuffled its executive deck and named a new chief operating officer to sort out logistics issues. And two weeks ago, a store in Washington became the first to seek union representation. Petco reports results before markets open Wednesday.

Analysts are bullish on the stock. Of 13 brokerages covering it, eight have a Buy or Strong Buy and four have a Hold rating. At a share price of around $15.90, the upside potential based on a median price target of $19.00 is about 19.5%. At the high price target of $30.00, the upside potential is nearly 95%.

For the company’s second quarter of fiscal 2023, analysts are expecting revenue of $1.49 billion, up 1.2% sequentially and 4.2% higher year over year. Adjusted EPS are forecast at $0.22, up 31.7% sequentially but down 12.0% year over year. For the full fiscal year ending in January, EPS are forecast to come in at $0.90, down 0.7%, on sales of $6.12 billion, up 5.4%.

Petco stock trades at 17.6 times expected 2023 EPS, 15.9 times estimated 2024 earnings of $1.00 and 15.0 times estimated 2025 earnings of $1.06 per share. The stock’s 52-week range is $12.88 to $26.21. Petco does not pay a dividend. Total shareholder return for the past year was negative 20.6%.

Toll Brothers

Shares of homebuilder Toll Brothers Inc. (NYSE: TOL) have dropped by 18.4% over the past 12 months. Since posting an all-time high in mid-December, the stock price has fallen by more than 33%. The company caters to affluent buyers who are not sensitive to interest rates, and its performance over the past two quarters has been impressive. Toll Brothers has beaten earnings estimates in 11 or the past 12 quarters, and sales are on track to post a solid gain for the full fiscal year. The report is expected after markets close on Tuesday.

Sentiment on the stock is better than lukewarm, but not exactly bullish. Of 19 brokerages covering the company, nine have a Buy or Strong Buy rating and seven rate the shares at Hold. At a share price of around $47.30, the upside potential based on a median price target of $53.50 is 13.1%. At the high price target of $80.00, the upside potential is more than 69%.