The earnings focus shifts to the Retail sector this week as traditional brick-and-mortar retailers come out with quarterly results. Stocks of most of these traditional operators have done better than the broader markets this year, except for
Wal-Mart ( WMT Quick Quote WMT - Free Report) which reports before the market’s open on Thursday and whose stock has been a notable laggard since the company’s last earnings release back in mid-February. The company’s recent big Indian purchase has failed to reverse the stock’s underperformance, with the stock now down -14.8% in the year-to-date period. In total, we have 125 companies on deck to come out with Q1 results, including 10 S&P 500 members. Macy’s ( M), Nordstrom ( JWN), Wal-Mart ( WMT Quick Quote WMT - Free Report) and Home Depot ( HD) are major retailers reporting results this week, with Cisco ( CSCO) and Deere & Company ( DE) as the other notable reports. Macy’s, Nordstrom and other department store stocks have been strong performers this year, with Macy’s up +18.7% and Nordstrom up +3.5% in the year-to-date period, doing better than the S&P 500’s +2.5% gain. Driving this recent momentum is the market’s optimism about these companies’ restructuring and competitive repositioning, with Macy’s actively bringing down its physical footprint and investing in its digital platform. We will see if either Macy’s or Nordstrom can sustain these gains after they come out with results in the next few days. The Zacks Retail sector is up +7% in the year-to-date period, doing better than the broader market. Helping the sector’s recent outperformance is the aforementioned positive momentum in the stock prices of Macy’s and other traditional retailers. But we should keep in mind that the Zacks Retail sector also includes online vendors like Amazon ( AMZN) in addition to traditional brick-and-mortar operators. You can clearly see this dynamic at play in the year-to-date chart below plotting Macy’s (blue line) against the Zacks Retail sector (red line) and Amazon (green line).
The recent momentum in these traditional retail stocks notwithstanding, the group remains on a long-term downtrend, as you can see in the chart below.
The only difference between this chart and the earlier one is time – this chart represents a 5-year period while the earlier one represents the year-to-date period. As you can see, Macy’s shares are down -25% over this longer time horizon.
There is another very interesting aspect to this chart as well. The blue (Macy’s) and green (Amazon) lines moving in lock-step with each other in the earlier part of the chart - through July 17, 2015 to be precise. In other words, what seem such obvious existential secular headwinds facing Macy’s and its peers at present are only so with the benefit of hindsight; the market had no idea what lay ahead for Macy’s and its peers prior to that July day in 2015. The takeaway from this discussion is that many trends that appear crystal clear in retrospect are anything but that in real time. What’s the significance of that date in July 2015? Amazon held its first Prime Day on July 15th to celebrate the 20th anniversary of its founding, which it claimed turned out to be bigger than Black Friday. As you can see in the chart above, the world has never been the same since that day, particularly for Macy’s and its department store peers. Retail Sector Scorecard We now have Q1 results from 50% of the retailers in the S&P 500 index. Total earnings for these Retail sector companies that have reported results already are up +26.1% from the same period last year on +14.9% higher revenues, with 68.4% beating EPS estimates and 63.2% beating revenue estimates. The comparison charts below put the sector’s Q1 results in a historical context.
The Retail sector results thus far are from the online vendors and restaurant players, with ‘traditional’ operators starting to report only this week. The comparison charts above show that while growth (both earnings as well as revenues) is tracking notably above historical periods, the proportion of positive surprises is on the weak side.
With respect to growth, Amazon’s blockbuster numbers, particularly on the revenues front, has a big role in the very strong growth picture at this stage. Amazon’s Q1 earnings increased +125% on +42.9% higher revenues, with the net dollar increase in the online retailer’s revenues an impressive $15.3 billion. The comparison charts below try to look at the sector’s growth picture with and without the Amazon contribution.
As you can see in the right-hand chart above, Q1 growth is still tracking above historical periods, but the growth rate is a lot lower on an ex-Amazon basis.
Q1 Earnings Season Scorecard (as of Friday, May 11th) For the S&P 500 index as a whole, we now have Q1 results from 455 index members. Total earnings for the 455 index members that have reported results already are up +24.4% from the same period last year on +9.4% higher revenues, with 77.6% beating EPS estimates and 75.2% beating revenue estimates. The proportion of companies beating both EPS and revenue estimates is 62.9%. To put these results in a historical context, the charts below compare the results thus far with what we had seen from the same group of 455 index members in other recent periods.
Earnings and revenue growth rate and the proportion of positive EPS surprises is tracking above what we have been seeing from the same group of 455 index members. But revenue surprises are tracking modestly below the preceding earnings season, but remain above historical periods.
What’s Happening to 2018 Q2 Estimates? The chart below plots the evolution of earnings growth expectations for the current period. As you can see, there has been no incremental improvement in the earnings outlook relative to what was expected ahead of the start of this earnings season.
A big part of the positive revisions we saw ahead of the start of the Q1 earnings season reflected the direct impact of the tax law changes, which was obviously a one-off development. Had all positive revisions been a result of tax law changes, we would have seen only EPS estimates go up, with no changes to revenue estimates. But that wasn’t the case, as revenue estimates had gone up as well, which raised our hopes that the aggregate revisions trend had finally turned positive after many years being in the other direction.
Disappointingly, we are not seeing that with estimates for Q2, as the above chart shows. In other words, the growth picture coming out of this earnings season is very impressive, but there is no improvement in expectations for the current and coming quarters. The recent uptrend in the exchange value of the U.S. dollar and questions about global growth will likely serve as incremental negatives for folks like us monitoring the aggregate revisions trend. This flat aggregate revisions trend notwithstanding, June quarter estimates have actually modestly ticked down for 11 of the 16 Zacks sectors and gone up for 4 sectors. The sectors enjoying positive revisions in the aggregate include Technology, Industrial Products, Basic Materials and Retail. Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include and Earnings Trends . He manages the Earnings Preview and Zacks Top 10 portfolios and writes the Focus List article for Weekly Market Analysis subscribers. Zacks Premium Here is a list of the 126 companies including 10 S&P 500 and reporting this week.
Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time NINE ENERGY SVC NINE 0.14 N/A 6.25% Monday BTO ATYR PHARMA INC LIFE -0.35 -0.56 9.30% Monday BTO CYNERGISTEK INC CTEK 0.1 0.11 122.22% Monday BTO LONESTAR RESRCS LONE -0.16 -0.18 25.00% Monday BTO MAZOR ROBOTICS MZOR N/A -0.22 55.88% Monday BTO HANWHA Q CELLS HQCL 0.14 0.21 20.00% Monday BTO WESTWATER RES WWR -0.12 -0.11 15.38% Monday BTO ALTA MESA RSRCS AMR 0.08 N/A N/A Monday BTO REMARK MEDIA MARK -0.35 0 -252.00% Monday BTO AGILENT TECH A 0.65 0.58 13.79% Monday AMC REXNORD CORP RXN 0.39 0.35 37.04% Monday AMC VERTEX ENERGY VTNR -0.06 -0.12 33.33% Monday AMC CYCLACEL PHARMA CYCC -0.13 -0.38 N/A Monday AMC SITO MOBILE LTD SITO -0.09 -0.07 11.76% Monday AMC INVITATION HOME INVH 0.28 -0.14 7.41% Monday AMC ITRON INC ITRI 0.13 0.57 7.45% Monday AMC MERSANA THERPTS MRSN -0.61 N/A -27.08% Monday AMC DICERNA PHARMA DRNA -0.41 -0.68 -18.42% Monday AMC SWITCH INC-A SWCH 0.04 N/A 14.29% Monday AMC ECO-STIM ENERGY ESES -0.06 -0.34 -133.33% Monday AMC MIMECAST LTD MIME -0.07 -0.05 -25.00% Monday AMC AMYRIS INC AMRS -0.47 -2.1 -342.86% Monday AMC ATLANTICA YIELD AY -0.02 -0.12 -215.79% Monday AMC CORIUM INTRNTNL CORI -0.41 -0.42 13.95% Monday AMC LIGHTPATH TECH LPTH 0.02 0.03 500.00% Monday AMC ROSEHILL RESRCS ROSE 0.04 -0.22 N/A Monday AMC SARATOGA INVEST SAR 0.53 0.19 -1.82% Monday AMC AVINGER INC AVGR N/A -25.6 -13.04% Monday AMC BOVIE MEDICAL BVX -0.01 -0.06 -50.00% Monday AMC EDAP TMS SA-ADR EDAP -0.02 0.13 0.00% Monday AMC ERYTECH PHARMA ERYP -0.59 N/A N/A Monday AMC FIVE POINT HLDG FPH -0.05 -0.2 -163.64% Monday AMC HOLLYSYS AUTOMT HOLI 0.35 0.22 53.85% Monday AMC POLAR POWER INC POLA -0.01 0.06 -500.00% Monday AMC PIONEER PWR SOL PPSI 0.02 0.17 18.75% Monday AMC RESHAPE LIFESCI RSLS N/A -1.27 9.00% Monday AMC TIDEWATER INC TDW -0.83 N/A -32.47% Monday AMC VIPSHOP HOLDNGS VIPS 0.13 0.15 26.67% Monday AMC VOXX INTL CP VOXX 0.05 0 164.29% Monday AMC XCEL BRANDS INC XELB N/A 0 100.00% Monday AMC CENT PUERTO-ADR CEPU N/A N/A N/A Monday AMC ALTAIR ENGINEER ALTR 0.03 N/A 150.00% Monday AMC ORTHOPEDIATRICS KIDS -0.28 N/A -2923.08% Monday AMC INTELLICHECK MO IDN -0.07 -0.09 0.00% Monday AMC CDTI ADV MATS CDTI -0.08 -0.19 66.67% Monday AMC NETSHOES CAYMAN NETS -0.32 -0.57 -183.33% Monday AMC SENESTECH INC SNES -0.15 -0.34 21.05% Monday AMC WIDEPOINT CORP WYY 0 -0.01 100.00% Monday AMC INNOVUS PHARMA INNV N/A -0.02 N/A Monday AMC CHINA LODGING HTHT N/A 0.3 50.00% Monday AMC HOME DEPOT HD 2.07 1.67 4.32% Tuesday BTO CORPORATE CAPTL CCT 0.43 N/A N/A Tuesday BTO CPI AEROSTRUCTR CVU 0.1 0.14 0.00% Tuesday BTO GOODRICH PET CP GDP -0.04 -0.63 -183.33% Tuesday BTO EAGLE MATERIALS EXP 1.04 0.88 13.99% Tuesday BTO NATL VISION HLD EYE 0.4 N/A 80.00% Tuesday BTO AFFIMED THERAP AFMD -0.18 -0.2 0.00% Tuesday BTO KAMADA LTD KMDA 0.03 -0.11 166.67% Tuesday BTO VIRTUSA CORP VRTU 0.37 0.25 -36.67% Tuesday BTO AZZ INC AZZ 0.39 0.44 -21.95% Tuesday BTO CONCORDIA INTL CXRX N/A -0.37 -566.67% Tuesday BTO DARIOHEALTH CP DRIO N/A 0.45 -3.45% Tuesday BTO GREENTREE HOSPT GHG 0.09 N/A N/A Tuesday BTO H2O INNOVATION HEOFF 0 0 -200.00% Tuesday BTO POINTER TELOCAT PNTR 0.27 0.29 22.73% Tuesday BTO PALATIN TECH PTN -0.04 -0.02 -16.67% Tuesday BTO TECOGEN INC TGEN 0 0 100.00% Tuesday BTO CRONOS GROUP CRON N/A -0.01 N/A Tuesday BTO UROGEN PHARMA URGN -0.73 N/A -13.85% Tuesday BTO FIVE STAR QLTY FVE N/A -0.14 -25.00% Tuesday BTO ALDEYRA THERAPT ALDX -0.37 -0.37 -15.63% Tuesday BTO DIGITAL ALLY IN DGLY N/A -0.29 -80.77% Tuesday BTO FUSION CONNECT FSNN -0.13 -0.34 -11.76% Tuesday BTO SORL AUTO PARTS SORL 0.19 0.36 144.44% Tuesday BTO LIMBACH HOLDNGS LMB 0.05 -0.1 -157.14% Tuesday AMC ONCOCYTE CORP OCX -0.13 -0.16 7.69% Tuesday AMC BOOT BARN HLDGS BOOT 0.17 0.12 2.22% Tuesday AMC PETIQ INC PETQ 0.05 N/A 280.00% Tuesday AMC GLADSTONE INVES GAIN 0.18 0.17 27.78% Tuesday AMC AVINO SILVER&GD ASM 0.03 0.01 -120.00% Tuesday AMC BOXLIGHT CORP BOXL -0.12 N/A N/A Tuesday AMC ENSYNC INC ESNC -0.05 -0.09 28.57% Tuesday AMC BIOCEPT INC BIOC -0.07 -0.21 5.26% Tuesday AMC DLH HOLDINGS CP DLHC 0.15 0.08 33.33% Tuesday AMC NETLIST INC NLST -0.03 -0.05 0.00% Tuesday AMC PARKERVISION PRKR N/A -0.33 -4.35% Tuesday AMC PURPLE INNOVATN PRPL -0.04 -0.04 N/A Tuesday AMC SOCIAL REALITY SRAX N/A -0.39 -566.67% Tuesday AMC SUNWORKS INC SUNW -0.1 -0.14 -550.00% Tuesday AMC RYB EDUCATION RYB N/A N/A N/A Tuesday AMC SALZGITTER AG SZGPY N/A 0.09 N/A Tuesday N/A THYSSENKRUPP AG TKAMY N/A 0.11 N/A Tuesday N/A DOLPHIN ENTMNT DLPN N/A -0.68 N/A Tuesday N/A MACYS INC M 0.36 0.24 4.83% Wednesday BTO CANADIAN SOLAR CSIQ 0.38 -0.1 21.69% Wednesday BTO OBSEVA SA OBSV -0.46 -0.58 14.29% Wednesday BTO ALTIMMUNE INC ALT -0.5 -0.3 76.00% Wednesday BTO MAGIC SOFTWARE MGIC 0.13 0.13 -15.38% Wednesday BTO CISCO SYSTEMS CSCO 0.59 0.54 9.43% Wednesday AMC TAKE-TWO INTER TTWO 0.44 0.65 40.48% Wednesday AMC JACK IN THE BOX JACK 0.86 0.98 16.04% Wednesday AMC DYNAGAS LNG PTR DLNG 0.15 0.37 -11.11% Wednesday AMC FLOWERS FOODS FLO 0.3 0.25 21.43% Wednesday AMC ACXIOM CORP ACXM 0.08 0.03 54.55% Wednesday AMC NETEASE INC NTES 1.88 4.29 -1.97% Wednesday AMC WALMART INC WMT 1.13 1 -2.21% Thursday BTO BAOZUN INC BZUN N/A 0.07 -12.50% Thursday BTO PENNEY (JC) INC JCP -0.22 0.06 26.67% Thursday BTO TEEKAY TANKERS TNK -0.08 0.04 50.00% Thursday BTO ALBIREO PHARMA ALBO 3.75 -1.06 29.49% Thursday BTO KEMET CORP KEM 0.39 0.12 50.00% Thursday BTO TEEKAY LNG PTNR TGP 0.33 0.22 9.38% Thursday BTO TEEKAY OFFSHORE TOO 0 0.02 -90.00% Thursday BTO EAGLE POINT CRD ECC 0.45 0.52 -4.44% Thursday BTO TEEKAY CORP TK -0.08 -0.41 -120.00% Thursday BTO CHILDRENS PLACE PLCE 2.22 1.95 1.20% Thursday BTO MANCHESTER UTD MANU -0.03 -0.05 0.00% Thursday BTO NORDSTROM INC JWN 0.42 0.43 -3.23% Thursday AMC APPLD MATLS INC AMAT 1.13 0.79 9.28% Thursday AMC ORION ENGINRD OEC 0.53 0.38 4.65% Thursday AMC VOXELJET AG-ADR VJET -0.12 -0.14 -33.33% Thursday AMC CAMPBELL SOUP CPB 0.61 0.59 23.46% Friday BTO DEERE & CO DE 3.33 2.49 12.93% Friday BTO APOLLO INV CP AINV 0.16 0.17 0.00% Friday BTO ASTRAZENECA PLC AZN 0.28 0.99 188.89% Friday BTO