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Solid Q3 Earnings Drive Retail ETFs Higher

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The overall earnings picture for the retail sector has been good amid the ongoing pandemic. Total earnings from 94.1% of the sector’s total market capitalization reported so far are up 20.4% on 11.4% higher revenues with 92.6% of the companies beating on earnings and an equal proportion exceeding top-line estimates. The growth pace, and revenue and earnings surprises are well above the four-quarter average.

This is especially true, as the digital shift has led to soaring e-commerce sales for traditional brick-and-mortar retailers. As such, most of them came up with stronger-than-expected results with a beat on both the top and bottom lines though a few lost in terms of share value (see: all the Consumer Discretionary ETFs here).  

Let’s dig into the details of some of the earnings releases.

Earnings in Focus

Big-box retailer Target (TGT - Free Report) jumped 5.1% following the earnings announcement. It topped the Zacks Consensus Estimate for earnings and revenues by $1.18 and $1.7 billion, respectively. The company has surpassed earnings estimates every time since the October quarter of 2018.

On the other hand, the world's largest retailer, Wal-Mart (WMT - Free Report) topped earnings estimates by 15 cents and revenue estimates by $1.7 billion. Consumers increasingly turned online to shop for everything from electronics and toys to groceries amid the pandemic. However, the share price of WMT fell 2.2% in response to its earnings announcement (read: Walmart Q3 Results Put These ETFs in Focus).

The second-largest home improvement retailer, Lowe’s (LOW - Free Report) beat estimates for earnings by a penny and revenues by $1.2 billion. This represents the sixth-straight earnings beat and the third-consecutive sales surprise. The stock dropped 6.4% in response to its earnings announcement. Meanwhile, shares of Home Depot (HD - Free Report) , the world's largest home improvement retailer, plunged 3.5% in response to its earnings announcement. Earnings per share of $3.18 surpassed the Zacks Consensus Estimate of $3.08 while revenues outpaced the consensus mark by $1.5 billion.

One of the leading departmental stores, Kohl’s (KSS - Free Report) benefited the most. The stock has gained nearly 10% following its third-quarter fiscal 2020 results. The company posted adjusted earnings of 1 cent per share. The Zacks Consensus Estimate was pegged at a loss of 43 cents per share. However, revenues of $3.98 billion came in below the Zacks Consensus Estimate of $4.1 billion. The second largest department store retailer, Macy’s (M - Free Report) saw a modest increase of 0.7% in its stock price following its earnings release. It beat earnings estimates by 62 cents. Revenues edged past the consensus estimate by $136 million.

ETFs in Focus

That said, a slew of robust results drove the retail space and ETFs higher from a one-week look. Below we have highlighted five ETFs in detail:  

Amplify Online Retail ETF (IBUY - Free Report)

This ETF has attracted $1.1 billion to its asset base and offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 58 stocks, each accounting for less than 3.3% of the assets. IBUY charges 65 bps in annual fees and has gained 2.7% in a week.

ProShares Online Retail ETF (ONLN - Free Report)

This ETF focuses on global retailers that derives significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 26 stocks in its basket with the highest concentration on the top firm — Amazon (AMZN - Free Report) . American firms make up three-fourth of the portfolio, while China accounts for 21% share. ONLN has accumulated $711.9 million in its asset base and charges 58 bps in annual fees. It has added 3.8% in a week (read: 5 ETFs to Buy on Amazon's Blowout Q3).

SPDR S&P Retail ETF (XRT - Free Report)

With AUM of $636.3 million, this product tracks the S&P Retail Select Industry Index, holding 84 securities in its basket with each accounting for no more than 2.7% of assets. Internet & direct marketing retail takes the largest share at 22.7%, while apparel retail, automotive retail and specialty stores round off the next three spots with a double-digit allocation each. The fund charges 35 bps in annual fees and has gained 5.5% in a week. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 4 Sector ETFs & Stocks to Buy on Forecast-Beating Jobs Data).

VanEck Vectors Retail ETF (RTH - Free Report)

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top two firms — Amazon at 19.2% and Home Depot at 10.9% — while the other firms hold no more than 9.3% share. The product has amassed $188.3 million in its asset base and charges 35 bps in annual fees. RTH has shed 1.5% in a week and has a Zacks ETF Rank #3 with a Medium risk outlook.

First Trust Nasdaq Retail ETF (FTXD - Free Report)

The fund follows the Nasdaq US Smart Retail Index and holds 51 stocks in its basket. It is moderately concentrated across components, with each firm holding no more than 7.2% of the assets. FTXD has accumulated $5.5 million in its asset base and has an expense ratio of 0.60%. The ETF has risen 1.4% in a week and carries a Zacks ETF Rank #3.

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