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Strong Retail Sector Earnings Performance
Wal-Mart shares struggled this year, with the retail giant’s February 19th earnings release raising doubts about its online business as well as overall margins. The stock lost more than 10% of its value following the February earnings report, with the subsequent May 17th release doing little to ease those worries.
Those clouds appear to have finally lifted after this quarterly report, where the retailer seems to be checking all the appropriate boxes, from a ramp-up in online sales to comp growth and even market share gains. This is helping the stock finally enjoy some sunshine.
Wal-Mart is hardly alone in enjoying the market’s affections after coming out with better-than-expected results. The overall tone of Retail sector results in recent days has been positive, notwithstanding a few standout disappointments like Macy’s. We have a number of major retailers like Kohl’s, Target and others coming out with Q2 results the week of the 20th, but the sector’s results thus far have been very good.
We now have Q2 results from 24 of the 38 retailers in the S&P 500 index that, combined, account for 85.1% of the sector’s total market cap in the index. Total earnings for these Retail sector companies that have reported results are up 34.9% from the same period last year on +9.7% higher revenues, with 91.7% beating EPS estimates and 75% beating revenue estimates.
This is better performance than we have seen from these same retailers in other recent periods. Please note that the sector’s Q2 performance compares favorably to historical periods even after we exclude Amazon’s impressive results.
Q2 Earnings Season Scorecard (as of August 17th, 2018)
We now have Q2 results from 467 S&P 500 members, or 93.4% of the index’s total market membership. Total earnings for these 467 companies are up 25.5% from the same period last year on +9.9% higher revenues, with 79.2% of the companies beating EPS estimates and 72.8% surpassing revenue estimates.
With another 17 index members on the docket to report quarterly results this week, we will have seen Q2 results from 484 S&P 500 members by the end of this week.
As you can see, the earnings and revenue growth pace is above the other comparable periods in the left-hand chart. The 79.2% proportion of these companies beating EPS estimates is above what we had seen from the same group of companies in other periods while the proportion of revenue beats is below the preceding period but above the historical level.
For the quarter as a whole, total Q2 earnings for the index are expected to be up 24.9% from the same period last year on +9.7% higher revenues. This exceeds the 2018 Q1’s +24.6% earnings growth, which was the highest quarterly growth pace since 2010.
The Q2 earnings growth pace likely represents peak growth in this cycle, with the growth pace expected to decelerate in the coming quarters. This is the case with revenues as well.
The Revisions Trend
The revisions trend has been the only area of somewhat weakness in an otherwise very strong corporate earnings picture. Estimates for the current period (2018 Q3) have modestly come down since the quarter got underway, in contrast to what we had been seeing in the comparable periods in the preceding three reporting cycles.
Given the ongoing emerging market worries in the wake of the Turkey situation, strength in the U.S. dollar and global trade uncertainty, this negative revisions trend is likely a sign of things to come going forward. We don’t want to come across as overly alarmist on the revisions front, but it is nevertheless a negative development in an otherwise very strong Q2 reporting cycle.
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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Wal-Mart, Macy's, Kohl's, Target and Amazon are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – August 20, 2018 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Wal-Mart (WMT - Free Report) , Macy’s (M - Free Report) , Kohl’s (KSS - Free Report) , Target (TGT - Free Report) and Amazon (AMZN - Free Report) .
To see more earnings analysis, visit https://at.zacks.com/?id=3207.
Every day, Zacks.com makes their Bull Stock of the Day available, free of charge. To see it, click here.
Strong Retail Sector Earnings Performance
Wal-Mart shares struggled this year, with the retail giant’s February 19th earnings release raising doubts about its online business as well as overall margins. The stock lost more than 10% of its value following the February earnings report, with the subsequent May 17th release doing little to ease those worries.
Those clouds appear to have finally lifted after this quarterly report, where the retailer seems to be checking all the appropriate boxes, from a ramp-up in online sales to comp growth and even market share gains. This is helping the stock finally enjoy some sunshine.
Wal-Mart is hardly alone in enjoying the market’s affections after coming out with better-than-expected results. The overall tone of Retail sector results in recent days has been positive, notwithstanding a few standout disappointments like Macy’s. We have a number of major retailers like Kohl’s, Target and others coming out with Q2 results the week of the 20th, but the sector’s results thus far have been very good.
We now have Q2 results from 24 of the 38 retailers in the S&P 500 index that, combined, account for 85.1% of the sector’s total market cap in the index. Total earnings for these Retail sector companies that have reported results are up 34.9% from the same period last year on +9.7% higher revenues, with 91.7% beating EPS estimates and 75% beating revenue estimates.
This is better performance than we have seen from these same retailers in other recent periods. Please note that the sector’s Q2 performance compares favorably to historical periods even after we exclude Amazon’s impressive results.
Q2 Earnings Season Scorecard (as of August 17th, 2018)
We now have Q2 results from 467 S&P 500 members, or 93.4% of the index’s total market membership. Total earnings for these 467 companies are up 25.5% from the same period last year on +9.9% higher revenues, with 79.2% of the companies beating EPS estimates and 72.8% surpassing revenue estimates.
With another 17 index members on the docket to report quarterly results this week, we will have seen Q2 results from 484 S&P 500 members by the end of this week.
As you can see, the earnings and revenue growth pace is above the other comparable periods in the left-hand chart. The 79.2% proportion of these companies beating EPS estimates is above what we had seen from the same group of companies in other periods while the proportion of revenue beats is below the preceding period but above the historical level.
For the quarter as a whole, total Q2 earnings for the index are expected to be up 24.9% from the same period last year on +9.7% higher revenues. This exceeds the 2018 Q1’s +24.6% earnings growth, which was the highest quarterly growth pace since 2010.
The Q2 earnings growth pace likely represents peak growth in this cycle, with the growth pace expected to decelerate in the coming quarters. This is the case with revenues as well.
The Revisions Trend
The revisions trend has been the only area of somewhat weakness in an otherwise very strong corporate earnings picture. Estimates for the current period (2018 Q3) have modestly come down since the quarter got underway, in contrast to what we had been seeing in the comparable periods in the preceding three reporting cycles.
Given the ongoing emerging market worries in the wake of the Turkey situation, strength in the U.S. dollar and global trade uncertainty, this negative revisions trend is likely a sign of things to come going forward. We don’t want to come across as overly alarmist on the revisions front, but it is nevertheless a negative development in an otherwise very strong Q2 reporting cycle.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>
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Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.