Nordstrom (JWN) Receives Rating Downgrade at Credit Suisse

NEW YORK (TheStreet) -- Shares of Nordstrom (JWN) are lower by 1.32% to $73.27 in pre-market trading on Thursday morning, following a rating downgrade to "neutral" from "outperform" at Credit Suisse.

The firm said it reduced its rating on the specialty fashion retailer based on its belief Nordstrom is likely to raise its capital spending over the next several quarters.

Credit Suisse cut its price target on Nordstrom to $76 from $85.

"Nordstrom is expected to increase capital spending by $439 million (or 51% y/y) to $1.3 billion in 2015, driving over half of the absolute dollars of growth in 2015," Credit Suisse said in an analyst note.

"Nordstrom's increase was largely due to its multi-pronged capital spending plan, including stepped up focus on IT/e-commerce, increased investment in their new Manhattan flagship, expansion of the full-line format in Canada and expansion of Rack in the U.S.," the firm continued.

Separately, TheStreet Ratings team rates NORDSTROM INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NORDSTROM INC (JWN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, increase in stock price during the past year and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • JWN's revenue growth has slightly outpaced the industry average of 2.1%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 42.08% is the gross profit margin for NORDSTROM INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 3.98% is above that of the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • NORDSTROM INC's earnings per share declined by 8.3% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, NORDSTROM INC's EPS of $3.72 remained unchanged from the prior years' EPS of $3.72. This year, the market expects an improvement in earnings ($3.75 versus $3.72).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Multiline Retail industry and the overall market, NORDSTROM INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • You can view the full analysis from the report here: JWN Ratings Report

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