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With the second-quarter earnings season now effectively behind us, the retail sector is the only one still hogging the limelight, as a few stocks are lined up to report their financials. The conclusion derived from recent reports of retailers is that this sector’s performance has not lived up to the expectations. For more details on earnings of this sector and others, please read our Earnings Trends report.
The initial assumptions that the improved household buying power, as a result of energy savings, would reflect in the retail sector’s results, failed to translate much into reality. Market experts believe that global economic headwinds such as yet-to-recover Chinese economy, Brexit, softness in the Eurozone and fluctuating commodity prices hurt consumers’ sentiment. Analysts pointed out that a competitive retail landscape, foreign currency headwinds, aggressive pricing strategy or promotional activities adopted to win back consumers might be the culprit behind the lower-than-expected performance.
With respect to the retail stocks’ Q2 scorecard, as of Aug 19, we have results from 37 retailers on the S&P 500 index (out of the 44 total), wherein total earnings grew 3.9% from the year-ago period and revenues increased 4.3%. However, only 59.5% companies beat earnings estimates (the second lowest for the entire S&P 500 index), while only 43.2% have surpassed revenue expectations. The decent-looking growth picture, however, is a reflection of strong results at Amazon.com, Inc. (AMZN - Free Report) . Once we exclude Amazon from the retail sector results, the comparisons start looking unfavorable.
Thus, as we gear up to enter another earnings season, it is time again to reshuffle your portfolio, and get rid of stocks that may hurt your returns. Here we have highlighted seven Retail-Wholesale stocks that posted a negative earnings surprise in the last concluded quarter. These stocks are also witnessing downward revisions in estimates and carry a Zacks Rank #4 (Sell) or 5 (Strong Sell). Falling estimates clearly indicate analysts’ skepticism about the future performance of these stocks.
7 Retail Stocks to Shun Now
Beware of Advance Auto Parts, Inc. (AAP - Free Report) that delivered lower-than-expected second-quarter 2016 results and holds a Zacks Rank #5. The company’s quarterly earnings of $1.90 per share missed the Zacks Consensus Estimate by 10.8%. This automotive aftermarket parts provider has underperformed the Zacks Consensus Estimate by an average of 4.8% over the trailing four quarters. Following the dismal performance, the Zacks Consensus Estimate of $7.44 and $8.23 for 2016 and 2017 has dropped 36 cents and 44 cents, respectively, over the past 30 days.
Don’t let your portfolio fall prey to Fiesta Restaurant Group, Inc. carrying a Zacks Rank #5. The company’s second-quarter 2016 earnings of 34 cents per share trailed the Zacks Consensus Estimate by 15%. The parent company of the Pollo Tropical and Taco Cabana fast casual restaurant brands has underperformed the Zacks Consensus Estimate by an average of 6.8% over the trailing four quarters. Following the drab results, the Zacks Consensus Estimate of $1.34 and $1.50 for 2016 and 2017 has decreased 17 cents and 21 cents, respectively, over the past 30 days.
TravelCenters of America LLC , which carries a Zacks Rank #5, also does not deserve a place in your list of stocks. The company continued with its dismal run as it reported second-quarter 2016 results. The quarterly earnings of 9 cents per share came in way below the Zacks Consensus Estimate of 16 cents. This operator of travel center and convenience store locations has underperformed the Zacks Consensus Estimate by an average of 95% over the trailing four quarters. Following a disappointing quarter, the Zacks Consensus Estimate of 11 cents and 68 cents for 2016 and 2017 has tumbled 18 cents and 14 cents, respectively, over the past 30 days.
TripAdvisor, Inc. (TRIP - Free Report) is another touch-me-not stock that delivered lower-than-expected second-quarter 2016 results and holds a Zacks Rank #5. The company’s quarterly earnings of 28 cents a share missed the Zacks Consensus Estimate by 9.7%. This online travel research company has underperformed the Zacks Consensus Estimate by an average of 2.6% over the trailing four quarters. Following the dismal performance, the Zacks Consensus Estimate of $1.14 and $1.52 for 2016 and 2017 has declined 13 cents and 17 cents, respectively, over the past 30 days.
Another stock that you should forget for now is Stage Stores, Inc. , carrying a Zacks Rank #4. The company’s second-quarter fiscal 2016 earnings of 3 cents a share lagged the Zacks Consensus Estimate of 5 cents. This operator of specialty department stores has underperformed the Zacks Consensus Estimate by an average of 33.5% over the trailing four quarters. Following the miserable performance, the Zacks Consensus Estimate of 18 cents and 30 cents for fiscal 2016 and fiscal 2017 has declined 5 cents and 9 cents, respectively, over the past 30 days.
Adding Fastenal Company (FAST - Free Report) to your portfolio might also hurt your overall return. This Zacks Rank #4 company posted second-quarter 2016 earnings of 45 cents per share, which fell short of the Zacks Consensus Estimate by 6.3%. The company, which is engaged in the wholesale distribution of industrial and construction supplies, has underperformed the Zacks Consensus Estimate by an average of 1.7% over the trailing four quarters. Following the murky performance, the Zacks Consensus Estimate of $1.75 and $1.86 for 2016 and 2017 has dropped 7 cents and 11 cents, respectively, over the past 60 days.
Last but not the least is Noodles & Company (NDLS - Free Report) , which carries a Zacks Rank #4. The company reported second-quarter 2016 loss of 3 cents per share, wider than the Zacks Consensus Estimate of a loss of 2 cents. This operator of a fast-casual restaurant chain has underperformed the Zacks Consensus Estimate by an average of 45.2% over the trailing four quarters. Following the disappointing results, the Zacks Consensus Estimate of a loss of 11 cents and 2 cents for 2016 and 2017 has decreased 16 cents and 15 cents, respectively, over the past 30 days.
Bottom Line
Remember the idiom, “A stitch in time saves nine”? It simply means that timely action may prevent serious loss later on. You can apply the same principle to your portfolio. Exiting the underperforming stock at the right time helps maximize your portfolio’s return. Thus, for the time being, you can shift your focus to better-ranked retail stocks.
Investors can confidently end their search at stocks with a better Zacks Rank status of either #1 (Strong Buy) or 2 (Buy), which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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7 Retail Stocks to Avoid Post Dismal Earnings
With the second-quarter earnings season now effectively behind us, the retail sector is the only one still hogging the limelight, as a few stocks are lined up to report their financials. The conclusion derived from recent reports of retailers is that this sector’s performance has not lived up to the expectations. For more details on earnings of this sector and others, please read our Earnings Trends report.
The initial assumptions that the improved household buying power, as a result of energy savings, would reflect in the retail sector’s results, failed to translate much into reality. Market experts believe that global economic headwinds such as yet-to-recover Chinese economy, Brexit, softness in the Eurozone and fluctuating commodity prices hurt consumers’ sentiment. Analysts pointed out that a competitive retail landscape, foreign currency headwinds, aggressive pricing strategy or promotional activities adopted to win back consumers might be the culprit behind the lower-than-expected performance.
With respect to the retail stocks’ Q2 scorecard, as of Aug 19, we have results from 37 retailers on the S&P 500 index (out of the 44 total), wherein total earnings grew 3.9% from the year-ago period and revenues increased 4.3%. However, only 59.5% companies beat earnings estimates (the second lowest for the entire S&P 500 index), while only 43.2% have surpassed revenue expectations. The decent-looking growth picture, however, is a reflection of strong results at Amazon.com, Inc. (AMZN - Free Report) . Once we exclude Amazon from the retail sector results, the comparisons start looking unfavorable.
Thus, as we gear up to enter another earnings season, it is time again to reshuffle your portfolio, and get rid of stocks that may hurt your returns. Here we have highlighted seven Retail-Wholesale stocks that posted a negative earnings surprise in the last concluded quarter. These stocks are also witnessing downward revisions in estimates and carry a Zacks Rank #4 (Sell) or 5 (Strong Sell). Falling estimates clearly indicate analysts’ skepticism about the future performance of these stocks.
7 Retail Stocks to Shun Now
Beware of Advance Auto Parts, Inc. (AAP - Free Report) that delivered lower-than-expected second-quarter 2016 results and holds a Zacks Rank #5. The company’s quarterly earnings of $1.90 per share missed the Zacks Consensus Estimate by 10.8%. This automotive aftermarket parts provider has underperformed the Zacks Consensus Estimate by an average of 4.8% over the trailing four quarters. Following the dismal performance, the Zacks Consensus Estimate of $7.44 and $8.23 for 2016 and 2017 has dropped 36 cents and 44 cents, respectively, over the past 30 days.
Don’t let your portfolio fall prey to Fiesta Restaurant Group, Inc. carrying a Zacks Rank #5. The company’s second-quarter 2016 earnings of 34 cents per share trailed the Zacks Consensus Estimate by 15%. The parent company of the Pollo Tropical and Taco Cabana fast casual restaurant brands has underperformed the Zacks Consensus Estimate by an average of 6.8% over the trailing four quarters. Following the drab results, the Zacks Consensus Estimate of $1.34 and $1.50 for 2016 and 2017 has decreased 17 cents and 21 cents, respectively, over the past 30 days.
TravelCenters of America LLC , which carries a Zacks Rank #5, also does not deserve a place in your list of stocks. The company continued with its dismal run as it reported second-quarter 2016 results. The quarterly earnings of 9 cents per share came in way below the Zacks Consensus Estimate of 16 cents. This operator of travel center and convenience store locations has underperformed the Zacks Consensus Estimate by an average of 95% over the trailing four quarters. Following a disappointing quarter, the Zacks Consensus Estimate of 11 cents and 68 cents for 2016 and 2017 has tumbled 18 cents and 14 cents, respectively, over the past 30 days.
TripAdvisor, Inc. (TRIP - Free Report) is another touch-me-not stock that delivered lower-than-expected second-quarter 2016 results and holds a Zacks Rank #5. The company’s quarterly earnings of 28 cents a share missed the Zacks Consensus Estimate by 9.7%. This online travel research company has underperformed the Zacks Consensus Estimate by an average of 2.6% over the trailing four quarters. Following the dismal performance, the Zacks Consensus Estimate of $1.14 and $1.52 for 2016 and 2017 has declined 13 cents and 17 cents, respectively, over the past 30 days.
Another stock that you should forget for now is Stage Stores, Inc. , carrying a Zacks Rank #4. The company’s second-quarter fiscal 2016 earnings of 3 cents a share lagged the Zacks Consensus Estimate of 5 cents. This operator of specialty department stores has underperformed the Zacks Consensus Estimate by an average of 33.5% over the trailing four quarters. Following the miserable performance, the Zacks Consensus Estimate of 18 cents and 30 cents for fiscal 2016 and fiscal 2017 has declined 5 cents and 9 cents, respectively, over the past 30 days.
Adding Fastenal Company (FAST - Free Report) to your portfolio might also hurt your overall return. This Zacks Rank #4 company posted second-quarter 2016 earnings of 45 cents per share, which fell short of the Zacks Consensus Estimate by 6.3%. The company, which is engaged in the wholesale distribution of industrial and construction supplies, has underperformed the Zacks Consensus Estimate by an average of 1.7% over the trailing four quarters. Following the murky performance, the Zacks Consensus Estimate of $1.75 and $1.86 for 2016 and 2017 has dropped 7 cents and 11 cents, respectively, over the past 60 days.
Last but not the least is Noodles & Company (NDLS - Free Report) , which carries a Zacks Rank #4. The company reported second-quarter 2016 loss of 3 cents per share, wider than the Zacks Consensus Estimate of a loss of 2 cents. This operator of a fast-casual restaurant chain has underperformed the Zacks Consensus Estimate by an average of 45.2% over the trailing four quarters. Following the disappointing results, the Zacks Consensus Estimate of a loss of 11 cents and 2 cents for 2016 and 2017 has decreased 16 cents and 15 cents, respectively, over the past 30 days.
Bottom Line
Remember the idiom, “A stitch in time saves nine”? It simply means that timely action may prevent serious loss later on. You can apply the same principle to your portfolio. Exiting the underperforming stock at the right time helps maximize your portfolio’s return. Thus, for the time being, you can shift your focus to better-ranked retail stocks.
Investors can confidently end their search at stocks with a better Zacks Rank status of either #1 (Strong Buy) or 2 (Buy), which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>