S&P 500   5,022.21
DOW   37,753.31
QQQ   425.84
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Abbott Laboratories Outlook is Healthy: Buy the Dip
Closing prices for crude oil, gold and other commodities
Stock market today: World shares are mixed after a tech-led retreat on Wall Street
Prologis Stock Leading U.S. Logistics Boom
Predicting a Bear Market: 7 Signs and Why it's Tough to Do
Johnson & Johnson’s Q1 Checkup: Mixed Results, Optimism Remains
S&P 500   5,022.21
DOW   37,753.31
QQQ   425.84
ASML Fires Warning Shot For Tech Investors
Abbott Laboratories Outlook is Healthy: Buy the Dip
Closing prices for crude oil, gold and other commodities
Stock market today: World shares are mixed after a tech-led retreat on Wall Street
Prologis Stock Leading U.S. Logistics Boom
Predicting a Bear Market: 7 Signs and Why it's Tough to Do
Johnson & Johnson’s Q1 Checkup: Mixed Results, Optimism Remains
S&P 500   5,022.21
DOW   37,753.31
QQQ   425.84
ASML Fires Warning Shot For Tech Investors
Abbott Laboratories Outlook is Healthy: Buy the Dip
Closing prices for crude oil, gold and other commodities
Stock market today: World shares are mixed after a tech-led retreat on Wall Street
Prologis Stock Leading U.S. Logistics Boom
Predicting a Bear Market: 7 Signs and Why it's Tough to Do
Johnson & Johnson’s Q1 Checkup: Mixed Results, Optimism Remains
S&P 500   5,022.21
DOW   37,753.31
QQQ   425.84
ASML Fires Warning Shot For Tech Investors
Abbott Laboratories Outlook is Healthy: Buy the Dip
Closing prices for crude oil, gold and other commodities
Stock market today: World shares are mixed after a tech-led retreat on Wall Street
Prologis Stock Leading U.S. Logistics Boom
Predicting a Bear Market: 7 Signs and Why it's Tough to Do
Johnson & Johnson’s Q1 Checkup: Mixed Results, Optimism Remains

Kohl’s Corporation: This Offprice Retailer Is Ready To Rally

Kohl's stock price - sign

Key Points

  • Kohl's is undervalued and yields more than 7% with a catalyst for higher share prices close.
  • The analysts underestimate its Q4 performance; guidance may impress. 
  • Institutions are loading up on this name ahead of earnings and have put a floor in the market. 
  • 5 stocks we like better than Kohl's

Kohl’s Corporation NYSE: KSS stock price has been wallowing near long-term lows despite signs of turnaround and an improving outlook for cash flow. This market needs a catalyst to get it moving, and there is one at hand. Results from TJX Companies NYSE: TJX suggest strength across the off-price universe, and analysts have set the bar low for Kohl’s, which reports in mid-month. 

Analysts Underestimate Kohl’s Strengths and Value

Analysts expect Kohl’s Q4 revenue to fall slightly compared to last year, setting it up for a significant outperformance. Competitor TJX Companies grew by 13% in Q4 to lead the retail sector. That compares to only 3.8% for the retail industry and 5% for leading player Walmart NYSE: WMT. Target NYSE: TGT, which has been losing share to Walmart and the off-price retailers, contracted by 5%. The TJX Companies also significantly widened its margin and provided solid guidance. 

Kohl’s is expected to improve margin significantly but may still outpace forecast due to the expected revenue strength. Regardless, the analysts’ consensus is sufficient to sustain the high-yielding dividend, and earnings growth is expected in the 2024 calendar year. Kohl’s dividend is substantial, yielding more than 7% for only 11X earnings, which is a deep value for the sector. Off-price leader TJX Companies trades at a much higher 25X earnings. 

The dividend payout is high at 80% of earnings, playing into the valuation discrepancy, but the cash flow outlook, balance sheet, and spending discipline offset the risk. Spending discipline, including a 13% reduction in Q3 inventory, is helping to improve cash flow and the balance sheet. Balance sheet highlights from Q3 include a flat cash position and a reduction in long-term debt that should be compounded in Q4. Because Q4 margin and profitability are expected to improve again in Q4, investors should expect additional balance sheet improvement for improvements to continue in 2024. 


The Sell-Side Put a Floor In Kohl’s Price

The institutional activity is telling and may foreshadow a strong report. Institutions have bought this stock on balance for most quarters of the last three years, and activity spiked in Q1. The to-date activity is a three-quarter high and the 2nd highest in the last three years, bringing total ownership to 98%. The largest institutional holders are BlackRock and Vanguard, with about 25% of the stock, but ownership is broad and includes public retirement funds and private capital. 

Analysts' sentiment will be a catalyst for the market following the release. The analysts lowered their ratings and price targets in 2022 and early 2023, putting intense pressure on the stock’s price, but relented later in the year. The 2nd half of 2023 analysts' activity is mixed but includes an upgrade to Positive from Mixed, a reiterated Moderate Buy, and an initiated equal-weight equivalent with a firmed price target. If Q4 is strong and guidance solid, the analysts' shift could gain traction and lift the price action. Until then, the consensus reported by MarketBeat aligns with the 150-day moving average, which is about 13% below recent action. 

The Technical Outlook: Kohl’s Is On the Brink of a Reversal

Kohl’s stock bottomed over the last twelve months and is trading near the top of the range. The pattern suggests bottoming and potential for reversal that will be confirmed or refuted soon. The critical level is $29, a trigger for bullish trades if crossed. A move above that level may find resistance near $34.50, so upward movement may be capped near term. If the news cannot catalyze a rally, a move back to the bottom of the range is expected but would present a deeper value higher yield opportunity provided no bad news is delivered. 

Should you invest $1,000 in Kohl's right now?

Before you consider Kohl's, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Kohl's wasn't on the list.

While Kohl's currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
TJX Companies (TJX)
3.9144 of 5 stars
$93.10-0.3%1.61%24.12Moderate Buy$102.19
Walmart (WMT)
4.2188 of 5 stars
$59.65-0.3%1.39%31.18Moderate Buy$61.54
Target (TGT)
4.946 of 5 stars
$164.47+0.7%2.68%18.42Moderate Buy$181.85
Kohl's (KSS)
4.5097 of 5 stars
$21.85-0.8%9.15%7.67Hold$24.20
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

  • tmhughes.writeon@gmail.com

Contributing Author

Technical and Fundamental Analysis

Experience

Thomas Hughes has been a contributing writer for MarketBeat since 2019.

Areas of Expertise

Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies

Education

Associate of Arts in Culinary Technology

Past Experience

Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights. 


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