Tuesday, October 17, 2023

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time update on the Q3 earnings season and new research reports on 16 major stocks, including Walmart Inc. (WMT), NIKE, Inc. (NKE) and The TJX Companies, Inc. (TJX). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Q3 Earnings Season Scorecard

Including this morning's earnings reports, we now have Q3 results from 39 S&P 500 members that combined account for 11.4% of the index's market capitalization. Total earnings for these 39 index members are up +7.1% from the same period last year on +7% higher revenues, with 89.7% beating EPS estimates and 69.2% beating revenue estimates.

While the beats percentages are about in-line with the preceding 20-quarter average for this group of 39 index members, the earnings growth rate represents a modest improvement over other recent quarters.

For the Finance sector, which has dominated this initial reporting cycle, we now have Q3 results from 31.2% of the sector's total market capitalization in the S&P 500 index. Total earnings for these Finance companies are up +9.7% from the same period last year on +9.3% higher revenues, with 100% of the companies beating EPS estimates and 72.7% beating revenue estimates. While the revenue beats percentage for this group of Finance sector companies is about in-line with other recent quarters, the EPS beats percentage is the highest for this group since the second quarter of 2021.

Hard to draw any firm conclusions from this relatively small sample of results at this stage, but it is nevertheless a positive start to the Q3 earnings season.

Looking at Q3 as a whole, combining the actual results for the 39 index members that have reported with estimates for the still-to-come companies, total earnings for the quarter are now expected to be down -1.1% on +0.8% higher revenues.

Excluding the Energy sector drag, Q3 earnings for the rest of the index would be up +3.9% on +3.3% higher revenues.

Today's Featured Analyst Reports  

Walmart shares have outperformed the Zacks Retail - Supermarkets industry over the past year (+20.2% vs. +16.7%). The Zacks analyst believes that the company’s robust omnichannel operations and strategic focus on enhancing delivery services have driven its sales and strong global e-commerce business.

However, an adverse category mix have hurt the company and is likely to linger in the third quarter. Also, its variable pay expenses are expected to increase, thereby impacting its bottom line.

(You can read the full research report on Walmart here >>>)

Nike shares have outperformed the Zacks Shoes and Retail Apparel industry over the past year (+13.7% vs. +10.9%). The Zacks analyst believes that compelling product innovation and digital leadership, continued strength in retail traffic trends within NIKE Direct, and robust performance in its digital and DTC businesses have been key drivers of the company’s business growth.

Yet, dismal fourth-quarter earnings performance have ensured that its shares have lagged the industry. Additionally, NIKE witnessed decline in gross margin owing to higher freight, logistics and input costs, and currency headwinds.

(You can read the full research report on Nike here >>>)

Shares of TJX have outperformed the Zacks Retail – Discount Stores industry over the past year (+34.2% vs. +5.9%). Per the Zacks analyst, the company’s off-price business model, strategic store locations, impressive brands and fashion products and supply-chain management have been aiding its performance.

The recovery of the HomeGoods (U.S.) division, a solid store and e-commerce growth efforts also bode well.

However, high wages, high debt level and very high supply chain costs have been major headwinds. Currency might also act as a deterrent.

(You can read the full research report on TJX here >>>)

Other noteworthy reports we are featuring today Gilead Sciences, Inc. (GILD), The Cigna Group (CI) and Schlumberger Limited (SLB).

Director of Research

Sheraz Mian

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>