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Buy 5 Mid-Cap Retailers Ahead of Earnings Results This Month

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The first-quarter 2021 earnings season is gradually heading toward its end. The overall results so far are highly impressive and well ahead of the consensus estimates. The majority of companies of most of the sectors have already reported earnings results. The notable exception is retail.

Meanwhile, five mid-cap (market capital >$1 billion <$10 billion) retail stocks with a favorable Zacks Rank are poised to beat earnings estimates this month. These stocks provided double-digit returns during the February-April period (first quarter for most of the retailers). A likely earnings beat with a favorable Zacks Rank may drive their stock prices northward in near term.

Retail Sector in Q1 At a Glance

The first quarter (January to March) was mostly positive for the retail sector. Retail sales jumped 5.6% in January while it slid 2.7% in February. However, retail sales soared 9.6% in March buoyed by a $1,400 direct check payment to Americans as part of a massive $1.9 trillion fiscal stimulus injected by the Biden administration.

The retail sales data of April is yet to be released. Most of the financial experts are expecting strong number owing to fiscal stimulus and faster-than-expected reopening of the economy supported by nationwide deployment of COVID-19 vaccines. Robust consumer satisfaction optimization indexes also supported this view.

Impressive Q1 Earnings Results So Far

As of May 7, 440 S&P 500 companies reported results. Total earnings of these companies were up 46.6% year over year on 9.8% higher revenues, with 86.1% of companies surpassing EPS estimates and 76.5% beating on revenues.

For the first quarter as a whole, total earnings of the S&P 500 companies are expected to be up 46.2% from the same period last year on 9.4% higher revenues. These estimates compare favorably with the 20.4% jump in earnings on 5.6% higher revenues projected at the beginning of the reporting cycle.

Our Top Picks

We have narrowed down our search to five mid-cap retail companies each slated to release earnings results this month. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank 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 their 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 five picks during February-April period.

 

Boot Barn Holdings Inc. (BOOT - Free Report) operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It also provides gifts and home merchandise. The company has an Earnings ESP of +20.46% for fourth-quarter fiscal 2021 (ended March 2021).

Boot Barn has an expected earnings growth rate of 39.5% for the current fiscal (ending March 2022). The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 30 days. It has a trailing four-quarter earnings surprise of 23.1%, on average. This Zacks Rank #2 company will release earnings on May 12, after the closing bell.

Macy's Inc. (M - Free Report) is an omnichannel retail organization, operating stores, websites and mobile applications under the Macy's, Bloomingdale's, and bluemercury brands. It sells a range of merchandise, including apparel and accessories for men, women, and kids, cosmetics, home furnishings, and other consumer goods. The company has an Earnings ESP of +28.60% for first-quarter fiscal 2021 (ended April 2021).

Macy's has an expected earnings growth rate of more than 100% for the current fiscal (ending January 2022). The Zacks Consensus Estimate for current-year earnings has improved 11.8% over the last 30 days. It has a trailing four-quarter earnings surprise of 116.6%, on average. This Zacks Rank #2 company will release earnings on May 18, before the opening bell.

Kohl's Corp. (KSS - Free Report) operates as a retail company in the United States. It offers branded apparel, footwear, accessories, beauty, and home products through its stores and website. The company has an Earnings ESP of +155.56% for first-quarter fiscal 2021 (ended April 2021).

Kohl's has an expected earnings growth rate of more than 100% for the current fiscal (ending January 2022). The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last 30 days. It has a trailing four-quarter earnings surprise of 52.5%, on average. This Zacks Rank #1 company will release earnings on May 20, before the opening bell.

Foot Locker Inc. (FL - Free Report) is a retailer of athletic shoes and apparel. The company operates in two segments, North America and International. The company has an Earnings ESP of +19.81% for first-quarter fiscal 2021 (ended April 2021).

Foot Locker has an expected earnings growth rate of 64.8% for the current fiscal (ending January 2022). The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days. This Zacks Rank #2 company will release earnings on May 21, before the opening bell.

Abercrombie & Fitch Co. (ANF - Free Report) operates as a specialty retailer of premium, high-quality casual apparel for men, women, and kids. The company has made significant progress in expanding digital and omni-channel capabilities. Notably, digital engagement with consumers has been its core strength. The company has an Earnings ESP of +22.92% for first-quarter fiscal 2021 (ended April 2021).

Abercrombie & Fitch has an expected earnings growth rate of more than 100% for the current fiscal (ending January 2022). The Zacks Consensus Estimate for current-year earnings has improved 4.4% over the last 30 days. It has a trailing four-quarter earnings surprise of 404.9%, on average. This Zacks Rank #1 company will release earnings on May 26, before the opening bell.

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