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6 Retailers to Stock Up on Ahead of Earnings Results This Month
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We are in the middle of the third-quarter 2020 earnings season and overall results are better than expected so far. Market participants are watching the results closely as the quarter was a mixed one both in terms of economic data and stock market performance.
Meanwhile, six retailers with a favorable Zacks Rank are set to release earnings results this month. Investment in these stocks is likely to be prudent at this stage.
Retail Sector in Q3
The retail sector grew in the third quarter albeit at a slow rate. Retail sales grew 0.9%, 0.6% and 1.9%, respectively, in July, August and September. Core retail sales (excluding the volatile auto sales) rose 1.3%, 0.5% and 1.6%, respectively, in the three months. Notably, core retail sales constitute a major part of the consumer spending component of the U.S. GDP.
The resurgence of coronavirus in the United States significantly dented retail sales. Moreover, the inability of the U.S. Congress to reach a deal on the size and scope of a fresh fiscal stimulus was a major reason for the tepid growth rate. However, the most important point is that retail sales grew despite the lack of a new trench of stimulus. Meanwhile, in absolute terms, retail sales have reached the pre-pandemic level.
Q3 Earnings Results in Brief
The third-quarter earnings season has started on a positive note although overall earnings are likely to remain negative. As of Oct 30, total S&P 500 earnings are expected to decline 10.5% on 2.8% lower revenues. This would mean an improvement over an earnings decline of 22% year over year on 2.9% lower revenues, as projected before the reporting cycle.
This also implies a marked improvement over second-quarter earnings that had plunged 32.3% on 9.2% lower revenues. Notably, first-quarter earnings of companies on the S&P 500 Index were down 13.5% on 1.4% higher revenues. More importantly, earnings expectations for the fourth quarter are gradually improving since July.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our six picks in third quarter.
Chuy's Holdings Inc. (CHUY - Free Report) owns and operates full-service restaurants serving a distinct menu of authentic Mexican food in Texas and 19 states in the Southeastern and Midwestern United States. The company has an Earnings ESP of +35.62%.
The Zacks Consensus Estimate for the current year has improved 5% over the last 7 days. It has a trailing four-quarter earnings surprise of 87.3%, on average. The company is set to release earnings results on Nov 5, after the closing bell.
Revolve Group Inc. (RVLV - Free Report) operates as an online fashion retailer for consumers in the United States and internationally. It operates through two segments, REVOLVE and FORWARD. The company has an Earnings ESP of +4.65%.
The Zacks Consensus Estimate for the current year has improved 3.9% over the last 30 days. It has a trailing four-quarter earnings surprise of 254.4%, on average. The company is set to release earnings results on Nov 11, after the closing bell.
Lowe's Companies Inc. (LOW - Free Report) is one of the world’s leading home improvement retailers, offering services to homeowners, renters and commercial business customers. The company has an Earnings ESP of +2.90% for the third quarter of fiscal 2020 (ended October 2020).
Lowe's Companies has an expected earnings growth rate of 48.8% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days. It has a trailing four-quarter earnings surprise of 17.2%, on average. The company will release its earnings report on Nov 18, before the opening bell.
Target Corp. (TGT - Free Report) operates as a general merchandise retailer in the United States. It offers beauty and household essentials, food assortments, including perishables, dry grocery, dairy, and frozen items; and apparel, accessories, home décor products, electronics, toys, seasonal offerings, and other merchandise. The company has an Earnings ESP of +11.29% for third-quarter fiscal 2020 (ended October 2020).
Target has an expected earnings growth rate of 12.6% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days. It has a trailing four-quarter earnings surprise of 37.6%, on average. The company will release earnings report on Nov 18, before the opening bell.
Beacon Roofing Supply Inc. (BECN - Free Report) distributes residential and commercial roofing materials, and other complementary building materials to contractors, home builders, retailers, and building materials suppliers. The company has an Earnings ESP of +3.25%.
The Zacks Consensus Estimate for the current year has improved 1% over the last 30 days. It has a trailing four-quarter earnings surprise of 3.9%, on average. The company is set to release its earnings results on Nov 19, after the closing bell.
Best Buy Co. Inc. (BBY - Free Report) operates as a retailer of technology products, services, and solutions in the United States, Canada, and Mexico. The company operates through two segments, Domestic and International. The company has an Earnings ESP of +14.92% for third-quarter fiscal 2020 (ended October 2020).
Best Buy has an expected earnings growth rate of 18% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days. It has a trailing four-quarter earnings surprise of 33.5%, on average. The company will release its earnings report on Nov 24, before the opening bell.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
Image: Bigstock
6 Retailers to Stock Up on Ahead of Earnings Results This Month
We are in the middle of the third-quarter 2020 earnings season and overall results are better than expected so far. Market participants are watching the results closely as the quarter was a mixed one both in terms of economic data and stock market performance.
Meanwhile, six retailers with a favorable Zacks Rank are set to release earnings results this month. Investment in these stocks is likely to be prudent at this stage.
Retail Sector in Q3
The retail sector grew in the third quarter albeit at a slow rate. Retail sales grew 0.9%, 0.6% and 1.9%, respectively, in July, August and September. Core retail sales (excluding the volatile auto sales) rose 1.3%, 0.5% and 1.6%, respectively, in the three months. Notably, core retail sales constitute a major part of the consumer spending component of the U.S. GDP.
The resurgence of coronavirus in the United States significantly dented retail sales. Moreover, the inability of the U.S. Congress to reach a deal on the size and scope of a fresh fiscal stimulus was a major reason for the tepid growth rate. However, the most important point is that retail sales grew despite the lack of a new trench of stimulus. Meanwhile, in absolute terms, retail sales have reached the pre-pandemic level.
Q3 Earnings Results in Brief
The third-quarter earnings season has started on a positive note although overall earnings are likely to remain negative. As of Oct 30, total S&P 500 earnings are expected to decline 10.5% on 2.8% lower revenues. This would mean an improvement over an earnings decline of 22% year over year on 2.9% lower revenues, as projected before the reporting cycle.
This also implies a marked improvement over second-quarter earnings that had plunged 32.3% on 9.2% lower revenues. Notably, first-quarter earnings of companies on the S&P 500 Index were down 13.5% on 1.4% higher revenues. More importantly, earnings expectations for the fourth quarter are gradually improving since July.
Our Top Picks
We have narrowed down our search to six retail stocks that are slated to release their earnings results this month. Each of these stocks carries a Zacks Rank #2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 (Hold) or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our six picks in third quarter.
Chuy's Holdings Inc. (CHUY - Free Report) owns and operates full-service restaurants serving a distinct menu of authentic Mexican food in Texas and 19 states in the Southeastern and Midwestern United States. The company has an Earnings ESP of +35.62%.
The Zacks Consensus Estimate for the current year has improved 5% over the last 7 days. It has a trailing four-quarter earnings surprise of 87.3%, on average. The company is set to release earnings results on Nov 5, after the closing bell.
Revolve Group Inc. (RVLV - Free Report) operates as an online fashion retailer for consumers in the United States and internationally. It operates through two segments, REVOLVE and FORWARD. The company has an Earnings ESP of +4.65%.
The Zacks Consensus Estimate for the current year has improved 3.9% over the last 30 days. It has a trailing four-quarter earnings surprise of 254.4%, on average. The company is set to release earnings results on Nov 11, after the closing bell.
Lowe's Companies Inc. (LOW - Free Report) is one of the world’s leading home improvement retailers, offering services to homeowners, renters and commercial business customers. The company has an Earnings ESP of +2.90% for the third quarter of fiscal 2020 (ended October 2020).
Lowe's Companies has an expected earnings growth rate of 48.8% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days. It has a trailing four-quarter earnings surprise of 17.2%, on average. The company will release its earnings report on Nov 18, before the opening bell.
Target Corp. (TGT - Free Report) operates as a general merchandise retailer in the United States. It offers beauty and household essentials, food assortments, including perishables, dry grocery, dairy, and frozen items; and apparel, accessories, home décor products, electronics, toys, seasonal offerings, and other merchandise. The company has an Earnings ESP of +11.29% for third-quarter fiscal 2020 (ended October 2020).
Target has an expected earnings growth rate of 12.6% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days. It has a trailing four-quarter earnings surprise of 37.6%, on average. The company will release earnings report on Nov 18, before the opening bell.
Beacon Roofing Supply Inc. (BECN - Free Report) distributes residential and commercial roofing materials, and other complementary building materials to contractors, home builders, retailers, and building materials suppliers. The company has an Earnings ESP of +3.25%.
The Zacks Consensus Estimate for the current year has improved 1% over the last 30 days. It has a trailing four-quarter earnings surprise of 3.9%, on average. The company is set to release its earnings results on Nov 19, after the closing bell.
Best Buy Co. Inc. (BBY - Free Report) operates as a retailer of technology products, services, and solutions in the United States, Canada, and Mexico. The company operates through two segments, Domestic and International. The company has an Earnings ESP of +14.92% for third-quarter fiscal 2020 (ended October 2020).
Best Buy has an expected earnings growth rate of 18% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days. It has a trailing four-quarter earnings surprise of 33.5%, on average. The company will release its earnings report on Nov 24, before the opening bell.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
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