Investors are gearing up for the Q3 reporting cycle, which is in its nascent stage. Only a handful of the S&P 500 stocks have reported their results so far. Per the Earnings Trends report as of Oct 14, out of the 34 S&P 500 members that have come up with their quarterly numbers, approximately 79.4% have posted positive earnings surprises, while 64.7% beat top-line expectations.
According to the report, earnings for the 34 S&P 500 companies that have reported so far are up 1.3% from the same period last year, while revenues have increased 2.9%.
Additionally, the report projects that earnings for the total S&P 500 companies will decline 2.2% from the year-ago period, whereas revenue will rise 1.5%. In Q2, earnings of S&P 500 companies declined 2.8% whereas revenues inched up 0.2%. We observe that this will be the sixth-straight quarter of an earnings decline, if the index witnesses a fall in earnings.
The performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, 8 are anticipated to observe an earnings decline in Q3, with Oil/Energy, Autos and Transportation being a big drag. However, the Retail/Wholesale sector is showing improvement in spite of overseas turmoil, fluctuating commodity prices and Fed rate-related controversies.
Total earnings for the Retail/Wholesale sector are estimated to rise 4.4%, whereas revenues are projected to increase 5.3%.
Among Retail/Wholesale stocks lined up to report, let’s take a sneak peek at two companies.
The pizza giant, Domino’s Pizza, Inc. (DPZ - Analyst Report) is slated to release third-quarter 2016 results on Oct 18, before the opening bell. We expect the company to surpass expectations. Last quarter, Domino’s posted robust results wherein both the top and bottom lines beat the Zacks Consensus Estimate, with the company reporting a positive earnings surprise of 5.4%.
We note that the pizza category is a fast growing segment in the U.S. quick-service restaurant industry and Domino’s ranks as the second-largest pizza chain in the world. Hence, its solid brand positioning is projected to drive sales. Moreover, second-quarter 2016 marked the 21st consecutive quarter of positive same-store-sales domestically and the 90th quarter of positive comps growth in the international segment. We anticipate the company’s digital ordering system, focus on re-imaging and other sales initiatives to help sustain the momentum in the third quarter as well. (Read more: Domino's Pizza Q3 Earnings: Is a Beat in the Cards?).
Domino’s Pizza carries a Zacks Rank #2 (Buy) and has an Earnings ESP of 1.11%. The Zacks Consensus Estimate for the quarter is pegged at 90 cents. Notably, previously the company carried a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Tile Shop Holdings, Inc. (TTS - Snapshot Report) , specialty retailer of manufactured and natural stone tiles, is scheduled to report third-quarter 2016 results on Oct 18. Our proven model does not conclusively show that Tile Shop is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Tile Shop has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 9 cents. The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult.
In the trailing four quarters, this Plymouth, MN-based company outperformed the Zacks Consensus Estimate by an average of 20.7%.
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