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The Retail sector’s Q3 results reconfirm the struggles of traditional brick-and-mortar operators with falling foot traffic as a result of sales shifting to the online medium. That said, the list of winners and losers this earnings season offers a mixed picture, in practically every Retail category.
The market liked Target’s (TGT - Free Report) results, but wasn’t happy with Wal-Mart’s (WMT - Free Report) , Home Depot (HD - Free Report) did fine but Lowe’s (LOW - Free Report) disappointed, and Gap dropped the ball while The Children Place (PLCE - Free Report) came out shining. The department store results were broadly well received. But as discussed in this space earlier, the department store outperformance was largely a function of cost controls and inventory management.
It is tough to be a traditional retailer in this environment of shifting consumer preferences. The one positive factor for the space is the favorable consumer spending outlook, a beneficiary of the steadily improving labor market and signs of wages gains. This favorable macro spending backdrop should help the Retail space in the coming quarters, particularly the all-important holiday shopping season. But it isn’t a case of the rising tide lifting all boats, with the winners and losers dependent on execution and management effectiveness.
Retail Sector Scorecard
As of Friday November 18th, we have seen Q3 results from 36 retailers in the S&P 500 index (out of the 43 total) that combined account for 94% of the sector’s total market cap in the index. Total earnings for these 36 retails are up +7.4% from the same period last year, on +4.9% higher revenues, with a relatively low 61.1% beating EPS estimates and a very low 44.4% coming ahead of top-line expectations. The proportion of retailers that have beaten Q3 EPS and revenue estimates is the second lowest of all 16 Zacks sectors, behind only Construction.
The side-by-side charts below compare the growth rates and beat ratios thus far with what we have seen from the same group of 36 retailers in other recent periods.
As you can see, the group’s Q3 earnings growth compares favorably with historical periods, though top-line growth is tracking below the 4- and 12-quarter averages. Positive surprises are notably hard to come by in Q3, both for earnings as well as revenues. The proportion of Retail sector companies beating EPS estimates is the second lowest of all 16 sectors in the index, with the sector the 6th lowest with respect to revenue surprises.
Q3 Earnings Scorecard (as of 11/18/2016)
We now have Q3 results from 476 S&P 500 members or 95.2% of the index’s total membership. Total earnings for these 476 companies are up +4.0% from the same period last year on +2.6% higher revenues, with 73.1% beating EPS estimates and 55.5% coming ahead of revenue estimates.
The table below shows the scorecard of these 476 index members. We have reached the final phase of the reporting cycle, with only 13 S&P 500 members reporting results this week.
Any way you look at it, this is better performance than we have seen from the same group of 476 index members in other recent periods, as the comparison charts below show.
The aggregate growth picture improves even further once the Energy sector’s drag is removed. Excluding the Energy sector, total earnings for the rest index members that have reported are up +7.4% on +4.3% higher revenues. The comparison charts below show the aggregated reported picture with and without the Energy sector.
In the comparison chart below, we are comparing the proportion of S&P 500 members that are beating both EPS and revenue estimates in Q3 with historical periods. As you can see, Q3 is tracking above other recent periods largely on account of more numerous revenue beats.
Q3 Expectations As a Whole
Combining the actual results from the 476 S&P 500 members with estimates from the still-to-come 24 index members, total Q3 earnings are now expected to be up +3.6% from the same period last year on +1.5% higher revenues. The +3.6% earnings growth in Q3 is the first positive growth for the index after 5 quarters of back-to-back declines.
The Q3 earnings growth may not be much, but it is nevertheless a notable improvement over what we saw in the preceding 5 quarters, as the chart below shows.
Positive growth was expected to show up in the last quarter of the year, with pre-season expectations putting Q3 growth in negative territory. In other words, not only has the earnings recession finally come to an end, but positive growth has arrived ahead of schedule. In a way, Q3 can be seen as an inflection point.
Expectations Beyond Q3
The chart below shows current bottom-up consensus earnings expectations for the index in 2016 Q3 and the following four quarters contrasted with actual results in the preceding four quarters. Please note that the columns represent bottom-up earnings totals for each quarter in billions of dollars while the line represents the quarterly growth rates.
The Energy sector drag is expected to end in 2016 Q4 and beyond, as the chart below of the sector’s earnings shows.
The improved Energy sector outlook makes sense, given shifting comparisons and the improvement in oil prices. But we will have to wait to find out if estimates for the other sectors will hold up as companies report Q3 results and provide guidance for Q4 and beyond.
It will be interesting to see if the decelerated pace of negative revisions that we saw the last earnings season will get repeated this time as well.
Note: Sheraz Mian regularly provides earnings analysis on Zacks.com and appears frequently in the print and electronic media. In addition to this Earnings Preview article, he publishes the Zacks Earnings Trends report every week.
If you want an email notification each time Sheraz publishes a new article, pleaseclick here >>>
Here is a list of the 71 companies including the 13 S&P 500 members that are reporting next week.
Company
Ticker
Current Qtr
Year-Ago Qtr
Last EPS Surprise %
Report Day
Time
TYSON FOODS A
TSN
1.24
0.83
13.08%
Monday
BTO
INTL GAME NEW
IGT
0.44
0.46
0.00%
Monday
BTO
CANADIAN SOLAR
CSIQ
0.29
0.79
70.00%
Monday
BTO
CHEETAH MBL-ADR
CMCM
N/A
0.03
-66.67%
Monday
BTO
CHINA ONLINE ED
COE
-2.36
N/A
-366.20%
Monday
BTO
YY INC-ADR
YY
N/A
0.43
26.76%
Monday
BTO
CUBIC CORP
CUB
0.2
1.05
-73.44%
Monday
BTO
COPART INC
CPRT
0.55
0.42
9.26%
Monday
AMC
SINA CORP
SINA
0.19
0.15
700.00%
Monday
AMC
WEIBO CORP ADS
WB
0.18
0.07
N/A
Monday
AMC
JACK IN THE BOX
JACK
0.88
0.62
22.99%
Monday
AMC
BEACON ROOFING
BECN
0.91
0.75
1.32%
Monday
AMC
PENNANTPARK INV
PNNT
0.25
0.27
0.00%
Monday
AMC
DYCOM INDS
DY
1.65
1.24
5.13%
Monday
AMC
PALO ALTO NETWK
PANW
-0.27
-0.36
-112.50%
Monday
AMC
STAR BULK CARRS
SBLK
-0.65
-0.55
2.67%
Monday
AMC
BROCADE COMM SY
BRCD
0.17
0.21
8.33%
Monday
AMC
CORIUM INTRNTNL
CORI
-0.39
-0.42
19.05%
Monday
AMC
ENANTA PHARMA
ENTA
-0.11
0.29
53.85%
Monday
AMC
GLADSTONE CAPTL
GLAD
0.21
0.26
0.00%
Monday
AMC
GRIDSUM HOLDING
GSUM
-0.09
N/A
N/A
Monday
AMC
TARENA INTL-ADR
TEDU
N/A
0.24
N/A
Monday
AMC
VIPSHOP HOLDNGS
VIPS
0.12
0.1
-7.14%
Monday
AMC
LIVE VENTURES
LIVE
N/A
-0.07
N/A
Monday
N/A
MEDTRONIC
MDT
1.11
1.03
1.98%
Tuesday
BTO
ANALOG DEVICES
ADI
0.89
1.03
7.89%
Tuesday
BTO
DOLLAR TREE INC
DLTR
0.78
0.49
-1.37%
Tuesday
BTO
CAMPBELL SOUP
CPB
0.95
0.95
-8.00%
Tuesday
BTO
PATTERSON COS
PDCO
0.61
0.56
0.00%
Tuesday
BTO
HORMEL FOODS CP
HRL
0.46
0.37
5.88%
Tuesday
BTO
JACOBS ENGIN GR
JEC
0.77
0.8
5.41%
Tuesday
BTO
SIGNET JEWELERS
SIG
0.19
0.33
-22.45%
Tuesday
BTO
BURLINGTON STRS
BURL
0.33
0.25
30.00%
Tuesday
BTO
EVINE LIVE INC
EVLV
-0.04
-0.09
50.00%
Tuesday
BTO
INNOCOLL HLDGS
INNL
-0.48
-0.62
14.52%
Tuesday
BTO
NAVIOS MARI HLD
NM
-0.25
-0.23
0.00%
Tuesday
BTO
CHICOS FAS INC
CHS
0.13
0.13
13.64%
Tuesday
BTO
DSW INC CL-A
DSW
0.49
0.51
20.69%
Tuesday
BTO
EATON VANCE
EV
0.61
0.53
0.00%
Tuesday
BTO
KIRKLANDS INC
KIRK
-0.1
-0.04
-4.76%
Tuesday
BTO
SEADRILL LTD
SDRL
0.2
0.21
43.90%
Tuesday
BTO
CRACKER BARREL
CBRL
1.84
1.7
0.95%
Tuesday
BTO
GOLDEN OCEAN GP
GOGL
-0.32
-0.9
8.57%
Tuesday
BTO
MOVADO GRP INC
MOV
0.71
0.92
-12.90%
Tuesday
BTO
AMER WOODMARK
AMWD
1.21
1.1
34.04%
Tuesday
BTO
BARNES & NOBLE
BKS
-0.27
-0.28
22.22%
Tuesday
BTO
BIOLINE RX LTD
BLRX
-0.07
-0.03
0.00%
Tuesday
BTO
CITI TRENDS INC
CTRN
0.03
0
80.00%
Tuesday
BTO
DAKTRONICS INC
DAKT
0.1
0.07
160.00%
Tuesday
BTO
HANWHA Q CELLS
HQCL
0.21
0.25
91.67%
Tuesday
BTO
NORTH ATL DRILG
NADL
-0.99
-0.1
453.33%
Tuesday
BTO
QIWI PLC-ADR
QIWI
0.27
0.27
17.86%
Tuesday
BTO
TECH DATA CORP
TECD
1.27
1.28
-1.39%
Tuesday
BTO
SEADRILL PTNRS
SDLP
0.53
0.98
27.42%
Tuesday
BTO
URBAN OUTFITTER
URBN
0.44
0.42
17.86%
Tuesday
AMC
HEWLETT PKD ENT
HPE
0.61
0.55
8.89%
Tuesday
AMC
HP INC
HPQ
0.36
0.93
6.67%
Tuesday
AMC
VEEVA SYSTEMS-A
VEEV
0.1
0.08
12.50%
Tuesday
AMC
MENTOR GRAPHICS
MENT
0.31
0.12
200.00%
Tuesday
AMC
PENNANTPARK FRC
PFLT
N/A
0.18
0.00%
Tuesday
AMC
QAD INC-A
QADA
-0.01
0.17
160.00%
Tuesday
AMC
NIMBLE STORAGE
NMBL
-0.48
-0.36
4.08%
Tuesday
AMC
CALERES INC
CAL
0.81
0.8
-9.80%
Tuesday
AMC
GAMESTOP CORP
GME
0.47
0.54
3.85%
Tuesday
AMC
DEERE & CO
DE
0.36
1.08
63.16%
Wednesday
BTO
TRINA SOLAR LTD
TSL
0.16
0.21
23.53%
Wednesday
BTO
ISRAEL CHEM LTD
ICL
0.09
0.12
66.67%
Wednesday
BTO
PARTNER COMM
PTNR
0.06
-0.01
N/A
Wednesday
BTO
SOC QUIMICA MIN
SQM
0.31
0.18
23.08%
Wednesday
AMC
INFINEON TECH
IFNNY
0.25
N/A
0.00%
Wednesday
N/A
NASPERS LTD-N
NPSNY
N/A
N/A
N/A
Friday
N/A
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Making Sense of Retail's Q3 Results
The Retail sector’s Q3 results reconfirm the struggles of traditional brick-and-mortar operators with falling foot traffic as a result of sales shifting to the online medium. That said, the list of winners and losers this earnings season offers a mixed picture, in practically every Retail category.
The market liked Target’s (TGT - Free Report) results, but wasn’t happy with Wal-Mart’s (WMT - Free Report) , Home Depot (HD - Free Report) did fine but Lowe’s (LOW - Free Report) disappointed, and Gap dropped the ball while The Children Place (PLCE - Free Report) came out shining. The department store results were broadly well received. But as discussed in this space earlier, the department store outperformance was largely a function of cost controls and inventory management.
It is tough to be a traditional retailer in this environment of shifting consumer preferences. The one positive factor for the space is the favorable consumer spending outlook, a beneficiary of the steadily improving labor market and signs of wages gains. This favorable macro spending backdrop should help the Retail space in the coming quarters, particularly the all-important holiday shopping season. But it isn’t a case of the rising tide lifting all boats, with the winners and losers dependent on execution and management effectiveness.
Retail Sector Scorecard
As of Friday November 18th, we have seen Q3 results from 36 retailers in the S&P 500 index (out of the 43 total) that combined account for 94% of the sector’s total market cap in the index. Total earnings for these 36 retails are up +7.4% from the same period last year, on +4.9% higher revenues, with a relatively low 61.1% beating EPS estimates and a very low 44.4% coming ahead of top-line expectations. The proportion of retailers that have beaten Q3 EPS and revenue estimates is the second lowest of all 16 Zacks sectors, behind only Construction.
The side-by-side charts below compare the growth rates and beat ratios thus far with what we have seen from the same group of 36 retailers in other recent periods.
As you can see, the group’s Q3 earnings growth compares favorably with historical periods, though top-line growth is tracking below the 4- and 12-quarter averages. Positive surprises are notably hard to come by in Q3, both for earnings as well as revenues. The proportion of Retail sector companies beating EPS estimates is the second lowest of all 16 sectors in the index, with the sector the 6th lowest with respect to revenue surprises.
Q3 Earnings Scorecard (as of 11/18/2016)
We now have Q3 results from 476 S&P 500 members or 95.2% of the index’s total membership. Total earnings for these 476 companies are up +4.0% from the same period last year on +2.6% higher revenues, with 73.1% beating EPS estimates and 55.5% coming ahead of revenue estimates.
The table below shows the scorecard of these 476 index members. We have reached the final phase of the reporting cycle, with only 13 S&P 500 members reporting results this week.
Any way you look at it, this is better performance than we have seen from the same group of 476 index members in other recent periods, as the comparison charts below show.
The aggregate growth picture improves even further once the Energy sector’s drag is removed. Excluding the Energy sector, total earnings for the rest index members that have reported are up +7.4% on +4.3% higher revenues. The comparison charts below show the aggregated reported picture with and without the Energy sector.
In the comparison chart below, we are comparing the proportion of S&P 500 members that are beating both EPS and revenue estimates in Q3 with historical periods. As you can see, Q3 is tracking above other recent periods largely on account of more numerous revenue beats.
Q3 Expectations As a Whole
Combining the actual results from the 476 S&P 500 members with estimates from the still-to-come 24 index members, total Q3 earnings are now expected to be up +3.6% from the same period last year on +1.5% higher revenues. The +3.6% earnings growth in Q3 is the first positive growth for the index after 5 quarters of back-to-back declines.
The Q3 earnings growth may not be much, but it is nevertheless a notable improvement over what we saw in the preceding 5 quarters, as the chart below shows.
Positive growth was expected to show up in the last quarter of the year, with pre-season expectations putting Q3 growth in negative territory. In other words, not only has the earnings recession finally come to an end, but positive growth has arrived ahead of schedule. In a way, Q3 can be seen as an inflection point.
Expectations Beyond Q3
The chart below shows current bottom-up consensus earnings expectations for the index in 2016 Q3 and the following four quarters contrasted with actual results in the preceding four quarters. Please note that the columns represent bottom-up earnings totals for each quarter in billions of dollars while the line represents the quarterly growth rates.
The Energy sector drag is expected to end in 2016 Q4 and beyond, as the chart below of the sector’s earnings shows.
The improved Energy sector outlook makes sense, given shifting comparisons and the improvement in oil prices. But we will have to wait to find out if estimates for the other sectors will hold up as companies report Q3 results and provide guidance for Q4 and beyond.
It will be interesting to see if the decelerated pace of negative revisions that we saw the last earnings season will get repeated this time as well.
Note: Sheraz Mian regularly provides earnings analysis on Zacks.com and appears frequently in the print and electronic media. In addition to this Earnings Preview article, he publishes the Zacks Earnings Trends report every week.
If you want an email notification each time Sheraz publishes a new article, please click here >>>
Here is a list of the 71 companies including the 13 S&P 500 members that are reporting next week.