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5 Retailers Set to Beat on Earnings as Sector Makes a Comeback
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In spite of challenges associated with the coronavirus pandemic, fading of the initial coronavirus-relief package and reimposition of restrictions in some states, the Retail – Wholesale sector is likely to have staged a comeback this earnings season. Though there were apprehensions regarding how comfortable consumers would be in terms of purchasing at a time fraught with high unemployment and lower disposable income, Americans showed resilience. Undeniably, the last-minute deal on second economic-rescue package of $900 billion, which entitled Americans to $600 stimulus checks, is also likely to have fueled demand to an extent.
Traditionally, the reporting cycle includes the U.S. holiday season, which accounts for a sizeable chunk of yearly revenues for retailers. According to the data released by National Retail Federation (NRF), holiday retail sales, excluding automobile dealers, gasoline stations and restaurants, increased 8.3% year over year to $789.4 billion. Meanwhile, the retail trade group also highlighted that online and other non-store sales surged 23.9% to $209 billion during the festive season.
NRF's chief economist Jack Kleinhenz said “Consumers shifted into high gear in December, giving the holiday season a strong finish that could be a good sign for the continuing recovery of the economy this year.”
While big-box retailers such as Walmart Inc. (WMT - Free Report) and The Home Depot, Inc. (HD - Free Report) are likely to have benefited from consumers’ shift in buying behavior and spending pattern due to the pandemic, mall-based retailers might have continued to struggle.
Keeping consumers’ product preferences and growing inclination toward online shopping in mind, retailers have been replenishing shelves with in-demand merchandise and ramping up investments in digitization. To beat the COVID-19 blues, companies have been directing resources toward advancing omni-channel capabilities, enhancing supply chain and providing faster delivery options, be it curbside pickup or delivery at home, in order to better engage with customers.
Clearly, the aforementioned factors raise optimism about the outcome of the results. However, margins remain an area to watch. Impact of investments to increase teams’ pay and benefits, and expenses on additional safety and cleansing measures owing to the coronavirus pandemic, on margins cannot be ruled out. Apart from these, any deleverage in SG&A rate, higher labor and occupancy costs, and increased marketing and other store-related expenses might have put more pressure on margins.
Decent Earnings Picture
Certainly, opportunities created and challenges posed by the pandemic will be the highlight of the quarter. Meanwhile, per the latest Earnings Outlook, the sector is anticipated to witness top-line growth of 12.4%, following an increase of 11.2% in the preceding season. Again, the bottom line is expected to jump 11.1% this earnings season, following a 21.3% growth in the last reporting cycle.
Market pundits believe that once the coronavirus spread is contained and more people get vaccinated, the retail sector, which touches every sphere of life, is likely to forge ahead with renewed vigor. As of now, there are stocks that could be great additions to your portfolio. We have identified five retail-wholesale stocks that are likely to trump estimates this earnings season.
Making the Perfect Choice
Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
5 Prominent Picks
Target Corporation (TGT - Free Report) , with a Zacks Rank #2 and an Earnings ESP of +9.79%, is a solid bet. The Zacks Consensus Estimate for its fourth-quarter fiscal 2020 earnings is pegged at $2.47, suggesting growth of 46.2% from the prior-year quarter. Also, the consensus estimate for earnings has moved up 2.9% in the past 30 days. This general merchandise retailer has a trailing four-quarter earnings surprise of 52.4%, on average. The company is slated to announce results on Mar 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Target Corporation Price, Consensus and EPS Surprise
DICK'S Sporting Goods, Inc. (DKS - Free Report) also deserves a mention. The stock has a Zacks Rank #2 and an Earnings ESP of +8.73%. The Zacks Consensus Estimate for its fourth-quarter fiscal 2020 earnings is pegged at $2.19, suggesting an improvement from $1.32 reported in the prior-year quarter. Also, the consensus estimate for earnings has increased by a penny in the past 30 days. Notably, this omni-channel sporting goods retailer has a trailing four-quarter earnings surprise of 34.7%, on average. The company is scheduled to report results on Mar 9.
DICKS Sporting Goods, Inc. Price, Consensus and EPS Surprise
You may consider home improvement retailer Lowe's Companies, Inc. (LOW - Free Report) . The stock has a Zacks Rank #3 and an Earnings ESP of +2.77%. The Zacks Consensus Estimate for its fourth-quarter fiscal 2020 earnings is pegged at $1.20, which suggests an increase of 27.7% from the prior-year quarter. Also, the Zacks Consensus Estimate for its quarterly earnings has moved up by 3 cents in the past 30 days. The company has a trailing four-quarter earnings surprise of 16.2%, on average. The company is scheduled to report results on Feb 24.
Lowes Companies, Inc. Price, Consensus and EPS Surprise
Dollar General Corporation (DG - Free Report) , with a Zacks Rank #3 and an Earnings ESP of +2.53%, is also worth betting on. The Zacks Consensus Estimate for its fourth-quarter fiscal 2020 earnings is pegged at $2.69, suggesting growth of 28.1% from the prior-year quarter. Also, the consensus estimate for earnings has been stable over the past 30 days. This discount retailer has a trailing four-quarter earnings surprise of 24.6%, on average.
Dollar General Corporation Price, Consensus and EPS Surprise
Investors can even count on Costco Wholesale Corporation (COST - Free Report) , an operator of membership warehouses, with a Zacks Rank #3 and an Earnings ESP of +2.43%. The Zacks Consensus Estimate for its second-quarter fiscal 2021 earnings is pegged at $2.41, indicating an improvement of 14.8% from the year-ago period. Also, the Zacks Consensus Estimate for quarterly earnings has risen by 1.7% in the past 30 days. The company has a trailing four-quarter earnings surprise of 5.5%, on average. The company is slated to announce results on Mar 4.
Costco Wholesale Corporation Price, Consensus and EPS Surprise
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Image: Bigstock
5 Retailers Set to Beat on Earnings as Sector Makes a Comeback
In spite of challenges associated with the coronavirus pandemic, fading of the initial coronavirus-relief package and reimposition of restrictions in some states, the Retail – Wholesale sector is likely to have staged a comeback this earnings season. Though there were apprehensions regarding how comfortable consumers would be in terms of purchasing at a time fraught with high unemployment and lower disposable income, Americans showed resilience. Undeniably, the last-minute deal on second economic-rescue package of $900 billion, which entitled Americans to $600 stimulus checks, is also likely to have fueled demand to an extent.
Traditionally, the reporting cycle includes the U.S. holiday season, which accounts for a sizeable chunk of yearly revenues for retailers. According to the data released by National Retail Federation (NRF), holiday retail sales, excluding automobile dealers, gasoline stations and restaurants, increased 8.3% year over year to $789.4 billion. Meanwhile, the retail trade group also highlighted that online and other non-store sales surged 23.9% to $209 billion during the festive season.
NRF's chief economist Jack Kleinhenz said “Consumers shifted into high gear in December, giving the holiday season a strong finish that could be a good sign for the continuing recovery of the economy this year.”
While big-box retailers such as Walmart Inc. (WMT - Free Report) and The Home Depot, Inc. (HD - Free Report) are likely to have benefited from consumers’ shift in buying behavior and spending pattern due to the pandemic, mall-based retailers might have continued to struggle.
Keeping consumers’ product preferences and growing inclination toward online shopping in mind, retailers have been replenishing shelves with in-demand merchandise and ramping up investments in digitization. To beat the COVID-19 blues, companies have been directing resources toward advancing omni-channel capabilities, enhancing supply chain and providing faster delivery options, be it curbside pickup or delivery at home, in order to better engage with customers.
Clearly, the aforementioned factors raise optimism about the outcome of the results. However, margins remain an area to watch. Impact of investments to increase teams’ pay and benefits, and expenses on additional safety and cleansing measures owing to the coronavirus pandemic, on margins cannot be ruled out. Apart from these, any deleverage in SG&A rate, higher labor and occupancy costs, and increased marketing and other store-related expenses might have put more pressure on margins.
Decent Earnings Picture
Certainly, opportunities created and challenges posed by the pandemic will be the highlight of the quarter. Meanwhile, per the latest Earnings Outlook, the sector is anticipated to witness top-line growth of 12.4%, following an increase of 11.2% in the preceding season. Again, the bottom line is expected to jump 11.1% this earnings season, following a 21.3% growth in the last reporting cycle.
Market pundits believe that once the coronavirus spread is contained and more people get vaccinated, the retail sector, which touches every sphere of life, is likely to forge ahead with renewed vigor. As of now, there are stocks that could be great additions to your portfolio. We have identified five retail-wholesale stocks that are likely to trump estimates this earnings season.
Making the Perfect Choice
Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
5 Prominent Picks
Target Corporation (TGT - Free Report) , with a Zacks Rank #2 and an Earnings ESP of +9.79%, is a solid bet. The Zacks Consensus Estimate for its fourth-quarter fiscal 2020 earnings is pegged at $2.47, suggesting growth of 46.2% from the prior-year quarter. Also, the consensus estimate for earnings has moved up 2.9% in the past 30 days. This general merchandise retailer has a trailing four-quarter earnings surprise of 52.4%, on average. The company is slated to announce results on Mar 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote
DICK'S Sporting Goods, Inc. (DKS - Free Report) also deserves a mention. The stock has a Zacks Rank #2 and an Earnings ESP of +8.73%. The Zacks Consensus Estimate for its fourth-quarter fiscal 2020 earnings is pegged at $2.19, suggesting an improvement from $1.32 reported in the prior-year quarter. Also, the consensus estimate for earnings has increased by a penny in the past 30 days. Notably, this omni-channel sporting goods retailer has a trailing four-quarter earnings surprise of 34.7%, on average. The company is scheduled to report results on Mar 9.
DICKS Sporting Goods, Inc. Price, Consensus and EPS Surprise
DICKS Sporting Goods, Inc. price-consensus-eps-surprise-chart | DICKS Sporting Goods, Inc. Quote
You may consider home improvement retailer Lowe's Companies, Inc. (LOW - Free Report) . The stock has a Zacks Rank #3 and an Earnings ESP of +2.77%. The Zacks Consensus Estimate for its fourth-quarter fiscal 2020 earnings is pegged at $1.20, which suggests an increase of 27.7% from the prior-year quarter. Also, the Zacks Consensus Estimate for its quarterly earnings has moved up by 3 cents in the past 30 days. The company has a trailing four-quarter earnings surprise of 16.2%, on average. The company is scheduled to report results on Feb 24.
Lowes Companies, Inc. Price, Consensus and EPS Surprise
Lowes Companies, Inc. price-consensus-eps-surprise-chart | Lowes Companies, Inc. Quote
Dollar General Corporation (DG - Free Report) , with a Zacks Rank #3 and an Earnings ESP of +2.53%, is also worth betting on. The Zacks Consensus Estimate for its fourth-quarter fiscal 2020 earnings is pegged at $2.69, suggesting growth of 28.1% from the prior-year quarter. Also, the consensus estimate for earnings has been stable over the past 30 days. This discount retailer has a trailing four-quarter earnings surprise of 24.6%, on average.
Dollar General Corporation Price, Consensus and EPS Surprise
Dollar General Corporation price-consensus-eps-surprise-chart | Dollar General Corporation Quote
Investors can even count on Costco Wholesale Corporation (COST - Free Report) , an operator of membership warehouses, with a Zacks Rank #3 and an Earnings ESP of +2.43%. The Zacks Consensus Estimate for its second-quarter fiscal 2021 earnings is pegged at $2.41, indicating an improvement of 14.8% from the year-ago period. Also, the Zacks Consensus Estimate for quarterly earnings has risen by 1.7% in the past 30 days. The company has a trailing four-quarter earnings surprise of 5.5%, on average. The company is slated to announce results on Mar 4.
Costco Wholesale Corporation Price, Consensus and EPS Surprise
Costco Wholesale Corporation price-consensus-eps-surprise-chart | Costco Wholesale Corporation Quote
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>