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5 Retailers Likely to Gain on Earnings Results This Month
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We are in the last- eg of the third-quarter 2021 earnings season. Results are pretty encouraging despite prolonged supply-chain disruptions, a labor shortage, higher inflationary pressure and the resurgence of the Delta variant of coronavirus.
Most of the sectors have already reported their quarterly financial numbers. The retail sector is an exception. Several major retailers are slated to release their earnings this month. Among them, we expect the stocks of Walmart Inc. (WMT - Free Report) , The Home Depot Inc. (HD - Free Report) , Ross Stores Inc. (ROST - Free Report) , DICK'S Sporting Goods Inc. (DKS - Free Report) and Foot Locker Inc. (FL - Free Report) to gain on earrings results.
Retail Sector in Q3 At a Glance
The retail sector had a mixed third quarter. Retail sales dropped 1.8% in July but recovered in next two months gaining 0.9% and 0.7% in August and September, respectively. Likewise, core retail sales (excluding auto) declined 1% in July but gained 2% in August and 0.8% in September.
In July and August, retail sales were affected by the rapid spread of the highly-infectious Delta variant of coronavirus. However, retail sales gathered pace from the second-half of August once new cases started declining. Moreover, massive pent-up demand among U.S. consumers supported by more than $2 trillion of personal savings drove retail sales.
Robust Third-Quarter Earnings So Far
As of Nov 10, 456 S&P 500 companies reported third-quarter results. Total earnings of these companies are up 42.8% year over year on 18.6% higher revenues with 79.6% beating EPS estimates and 74.5% surpassing revenue estimates. The proportion of these 456 index members beating both EPS and revenue estimates is 62.3%.
At present, total third-quarter earnings of the market's benchmark — the S&P 500 Index — are projected to jump 39.7% from the same period last year on 16.9% higher revenues. This suggests a steady improvement from 26.1% earnings growth on 14% higher revenues, estimated at the beginning of the reporting cycle.
Earnings results of the first two quarters of this year were favorably impacted since the corresponding quarters of last year were affected by the pandemic-led lockdowns and restrictions. This was evident from 95% year-over-year earnings growth on 25.3% higher revenues in the second quarter and 49.3% year-over-year earnings growth on 10.3% higher revenues in first-quarter 2021.
Nevertheless, the U.S. economy started reopening partially albeit at a languid pace since the third quarter of 2020. Notwithstanding favorable comparisons with last year, third-quarter 2021 earnings estimates reflect genuine growth, climbing more than 23% from the pre-pandemic third-quarter of 2019.
Our research shows that for stocks with the combination of a Zacks Rank #3 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 five above-mentioned stocks in the last quarter.
Image Source: Zacks Investment Research
The Home Depot Inc. is witnessing significant benefits from the execution of the “One Home Depot” investment plan, which focuses on expanding supply chain facilities, technology investments and enhancement to the digital experience.
Amid the pandemic, customers have been increasingly blending the physical and digital elements of the shopping experience, making the interconnected One Home Depot strategy most relevant. Home Depot is effectively adapting to the demand for renovations and construction activities, driven by prudent investments. HD is gaining from growth in Pro and DIY customer categories as well as digital momentum.
The Home Depot has an Earnings ESP of +0.93% for third-quarter fiscal 2021. It has an expected earnings growth rate of 20.6% for the current year (January 2022). The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 7 days.
HD recorded earnings surprises in the last four reported quarters, with an average beat of 9.2%. This Zacks Rank #2 company is set to release earnings results on Nov 16, before the opening bell.
Walmart Inc. continued to benefit from its solid omni-channel capabilities. To boost e-commerce sales, Walmart has been focused on strengthening delivery capabilities. This, along with efforts to enhance store experience, fueled second-quarter results, wherein earnings and sales rose year on year. WMT also raised its fiscal 2022 guidance, taking into consideration robust underlying market trends.
Walmart has an Earnings ESP of +1.97% for third-quarter fiscal 2021. It has an expected earnings growth rate of 15.2% for the current year (January 2022). The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 7 days.
WMT recorded earnings surprises in three out of the last four reported quarters, with an average beat of 14.3%. This Zacks Rank #3 company is set to release earnings results on Nov 16, before the opening bell.
Ross Stores Inc. is gaining from robust customer demand, accelerated vaccination rates, government stimulus payments and easing of COVID-19 restrictions. Sales benefited from broad-based growth across all merchandise categories and regions. Earnings benefited from the COGS leverage, a rebound in operating margin, stringent inventory management and reduced Packaway. Ross Stores raised its guidance for fiscal 2021.
Ross Stores has an Earnings ESP of +5.09% for third-quarter fiscal 2021. It has an expected earnings growth rate of more than 100% for the current year (January 2022). The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 7 days.
ROST recorded earnings surprises in three out of the last four reported quarters, with an average beat of 28.7%. This Zacks Rank #3 company is set to release earnings results on Nov 18, after the closing bell.
Foot Locker Inc. is a retailer of athletic shoes and apparel. The company operates in two segments, North America and International. Foot Locker’s demand conditions have been improving, since outdoor activities started picking up pace.
Such trends benefitted FL’s second-quarter fiscal 2021 performance, wherein the top and the bottom-line increased year on year and surpassed the Zacks Consensus Estimate. Management is confident about delivering a low to mid-teen increase in comps in fiscal 2021.
Foot Locker has an Earnings ESP of +11.08% for third-quarter fiscal 2021. It has an expected earnings growth rate of more than 100% for the current year (January 2022). FL recorded earnings surprises in the last four reported quarters, with an average beat of 73.1%. This Zacks Rank #3 company is set to release earnings results on Nov 19, before the opening bell.
DICK'S Sporting Goods Inc. has been gaining from continued focus on developing every possible avenue to generate greater sales. As part of its long-term plan, DKS plans to make significant investments in e-commerce, technology, store payroll, Team Sports and private brands. DICK'S Sporting Goods remains on track to build the best omni-channel experience for athletes by strengthening store network and expanding e-commerce presence.
DKS has an Earnings ESP of +17.35% for third-quarter fiscal 2021. It has an expected earnings growth rate of more than 100% for the current year (January 2022). The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 30 days.
DICK'S Sporting Goods recorded earnings surprises in the last four reported quarters, with an average beat of 117.4%. This Zacks Rank #3 company is set to release earnings results on Nov 23, before the opening bell.
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5 Retailers Likely to Gain on Earnings Results This Month
We are in the last- eg of the third-quarter 2021 earnings season. Results are pretty encouraging despite prolonged supply-chain disruptions, a labor shortage, higher inflationary pressure and the resurgence of the Delta variant of coronavirus.
Most of the sectors have already reported their quarterly financial numbers. The retail sector is an exception. Several major retailers are slated to release their earnings this month. Among them, we expect the stocks of Walmart Inc. (WMT - Free Report) , The Home Depot Inc. (HD - Free Report) , Ross Stores Inc. (ROST - Free Report) , DICK'S Sporting Goods Inc. (DKS - Free Report) and Foot Locker Inc. (FL - Free Report) to gain on earrings results.
Retail Sector in Q3 At a Glance
The retail sector had a mixed third quarter. Retail sales dropped 1.8% in July but recovered in next two months gaining 0.9% and 0.7% in August and September, respectively. Likewise, core retail sales (excluding auto) declined 1% in July but gained 2% in August and 0.8% in September.
In July and August, retail sales were affected by the rapid spread of the highly-infectious Delta variant of coronavirus. However, retail sales gathered pace from the second-half of August once new cases started declining. Moreover, massive pent-up demand among U.S. consumers supported by more than $2 trillion of personal savings drove retail sales.
Robust Third-Quarter Earnings So Far
As of Nov 10, 456 S&P 500 companies reported third-quarter results. Total earnings of these companies are up 42.8% year over year on 18.6% higher revenues with 79.6% beating EPS estimates and 74.5% surpassing revenue estimates. The proportion of these 456 index members beating both EPS and revenue estimates is 62.3%.
At present, total third-quarter earnings of the market's benchmark — the S&P 500 Index — are projected to jump 39.7% from the same period last year on 16.9% higher revenues. This suggests a steady improvement from 26.1% earnings growth on 14% higher revenues, estimated at the beginning of the reporting cycle.
Earnings results of the first two quarters of this year were favorably impacted since the corresponding quarters of last year were affected by the pandemic-led lockdowns and restrictions. This was evident from 95% year-over-year earnings growth on 25.3% higher revenues in the second quarter and 49.3% year-over-year earnings growth on 10.3% higher revenues in first-quarter 2021.
Nevertheless, the U.S. economy started reopening partially albeit at a languid pace since the third quarter of 2020. Notwithstanding favorable comparisons with last year, third-quarter 2021 earnings estimates reflect genuine growth, climbing more than 23% from the pre-pandemic third-quarter of 2019.
Stocks in Focus
Five retailers will report earnings results this month. Each of these stocks carries either a Zacks Rank #2 (Buy) or 3 (Hold) 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 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 five above-mentioned stocks in the last quarter.
The Home Depot Inc. is witnessing significant benefits from the execution of the “One Home Depot” investment plan, which focuses on expanding supply chain facilities, technology investments and enhancement to the digital experience.
Amid the pandemic, customers have been increasingly blending the physical and digital elements of the shopping experience, making the interconnected One Home Depot strategy most relevant. Home Depot is effectively adapting to the demand for renovations and construction activities, driven by prudent investments. HD is gaining from growth in Pro and DIY customer categories as well as digital momentum.
The Home Depot has an Earnings ESP of +0.93% for third-quarter fiscal 2021. It has an expected earnings growth rate of 20.6% for the current year (January 2022). The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 7 days.
HD recorded earnings surprises in the last four reported quarters, with an average beat of 9.2%. This Zacks Rank #2 company is set to release earnings results on Nov 16, before the opening bell.
Walmart Inc. continued to benefit from its solid omni-channel capabilities. To boost e-commerce sales, Walmart has been focused on strengthening delivery capabilities. This, along with efforts to enhance store experience, fueled second-quarter results, wherein earnings and sales rose year on year. WMT also raised its fiscal 2022 guidance, taking into consideration robust underlying market trends.
Walmart has an Earnings ESP of +1.97% for third-quarter fiscal 2021. It has an expected earnings growth rate of 15.2% for the current year (January 2022). The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 7 days.
WMT recorded earnings surprises in three out of the last four reported quarters, with an average beat of 14.3%. This Zacks Rank #3 company is set to release earnings results on Nov 16, before the opening bell.
Ross Stores Inc. is gaining from robust customer demand, accelerated vaccination rates, government stimulus payments and easing of COVID-19 restrictions. Sales benefited from broad-based growth across all merchandise categories and regions. Earnings benefited from the COGS leverage, a rebound in operating margin, stringent inventory management and reduced Packaway. Ross Stores raised its guidance for fiscal 2021.
Ross Stores has an Earnings ESP of +5.09% for third-quarter fiscal 2021. It has an expected earnings growth rate of more than 100% for the current year (January 2022). The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 7 days.
ROST recorded earnings surprises in three out of the last four reported quarters, with an average beat of 28.7%. This Zacks Rank #3 company is set to release earnings results on Nov 18, after the closing bell.
Foot Locker Inc. is a retailer of athletic shoes and apparel. The company operates in two segments, North America and International. Foot Locker’s demand conditions have been improving, since outdoor activities started picking up pace.
Such trends benefitted FL’s second-quarter fiscal 2021 performance, wherein the top and the bottom-line increased year on year and surpassed the Zacks Consensus Estimate. Management is confident about delivering a low to mid-teen increase in comps in fiscal 2021.
Foot Locker has an Earnings ESP of +11.08% for third-quarter fiscal 2021. It has an expected earnings growth rate of more than 100% for the current year (January 2022). FL recorded earnings surprises in the last four reported quarters, with an average beat of 73.1%. This Zacks Rank #3 company is set to release earnings results on Nov 19, before the opening bell.
DICK'S Sporting Goods Inc. has been gaining from continued focus on developing every possible avenue to generate greater sales. As part of its long-term plan, DKS plans to make significant investments in e-commerce, technology, store payroll, Team Sports and private brands. DICK'S Sporting Goods remains on track to build the best omni-channel experience for athletes by strengthening store network and expanding e-commerce presence.
DKS has an Earnings ESP of +17.35% for third-quarter fiscal 2021. It has an expected earnings growth rate of more than 100% for the current year (January 2022). The Zacks Consensus Estimate for current-year earnings improved 0.2% over the last 30 days.
DICK'S Sporting Goods recorded earnings surprises in the last four reported quarters, with an average beat of 117.4%. This Zacks Rank #3 company is set to release earnings results on Nov 23, before the opening bell.