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Target, Lowe's Beat in Q1 on Heavy Selling in Early Market

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Wednesday, May 19, 2021

The rollout of Retail Earnings Week for Q1 continues today, with two more giants in the field reporting quarterly results ahead of today’s opening bell. Keep in mind pre-market futures are down big again — just like they were Monday, Tuesday, Wednesday of last week — so any positive results from these companies may see initial reaction to the stock price not directly correlate.

For Target (TGT - Free Report) , this is not the case. The Zacks Rank #3 (Hold)-rated company with a Value-Growth-Momentum score of A is up 3% in early trading on a big beat on the company’s bottom line: $3.69 per share stomped the Zacks consensus $2.26 per share and outpaces the year-ago quarter by more than 5.5x. Revenues of $24.20 billion surpassed the $22.29 billion expected, which itself was a 13%+ gain year over year.

The big-box retailer, which has not missed a consensus earnings estimate since Q4 2018, saw same-store sales rise 23% from the year-ago quarter, which more than doubled expectations, with 23% growth in drive-up sales. The company claims to have gained $1 billion in market share in its fiscal Q1. Shares are up 16% year to date and almost 67% from a year ago.

Lowe’s (LOW - Free Report) also put up solid beats over estimates — $3.21 per share on $24.42 billion bettered the $2.58 per share on $23.66 billion expected, respectively — on same-store sales that grew nearly 26%, topping the 20.3% analysts were looking for. However, compared to rival Home Depot’s (HD) Q1 release yesterday, which posted 33% same-store sales growth, we see early trading selling off Lowe’s shares 2.5% on the news. Again, we’re sliding in pre-market trading across the board.

This evening, the best-selling U.S. auto for more than a decade — the Ford (F - Free Report) F-series, including the wildly popular F-150 — unveils an important makeover: the F-150 Lightning, which is the electric vehicle (EV) version of the ubiquitous pickup truck. Leaked by none other than President Biden yesterday, who supposed the vehicle went from 0-60 mph in 4.3 or 4.4 seconds, the truck was still “under wraps” when the president took it for a test drive.

The Ford F-series is not only the most popular group of vehicles in America, it is so by a very wide margin: 897K trucks were sold last year, far surpassing the second-ranked Chevy Silverado, which sold 571K. In fact, the top four autos sold in the U.S. last year were pickup trucks. So “going green” for the top dog in this class may represent a new high-water mark for the industry — and hopefully the health of the planet.

Roughly a half-hour before the market opens this Hump Day, the Dow is down 380 points, the S&P 500 -50 and the Nasdaq is -230 points. If last week’s trading stands as something of a model for this week, we should see some nice valuations open up and make some very fine companies ripe for buying. That’s what happened Thursday and Friday of last week, though the week overall finished in the red.

This looks to be a way of moderating valuations ahead of the next economic reality to force market sentiment — in either direction. The Great Reopening will continue in some fashion, including overseas, but may hit some bumps in the road. Also, with China introducing a crypto yuan, Bitcoin has now sold off to below $35K, -25% just this morning alone. So there are fewer places to hide these days. But do you have your buy list ready?

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