We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Zacks Earnings Trends Highlights: Home Depot, Lowe's, Walmart and Target
Read MoreHide Full Article
For Immediate Release
Chicago, IL – November 14, 2024 – Zacks Director of Research Sheraz Mian says, "Earnings growth is expected to accelerate after the modest growth pace in Q3, with double-digit earnings growth projected in three of the next four quarters."
Looking Ahead to Retail Sector Earnings
Note: The following is an excerpt from this week’sEarnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
Total Q3 earnings for the 458 S&P 500 members that have reported results through Wednesday, November 13th, are up +6.9% on +5.4% higher revenues, with 73.6% beating EPS estimates and 61.4% beating revenue estimates.
The earnings and revenue growth pace for this group of 458 index members is broadly in line with the growth trend of recent quarters, but companies have struggled to beat consensus EPS and revenue estimates. The Q3 EPS and revenue beats percentages are tracking notably below the 20-quarter averages for this group of companies.
Net margins in Q3 are expected to be modestly above the year-earlier level, with the Tech sector as the primary driver of keeping the year-over-year gains positive. This is the 5th consecutive quarter of expanding net margins for the S&P 500 index.
Earnings growth is expected to accelerate after the modest growth pace in Q3, with double-digit earnings growth projected in three of the next four quarters.
Retail Sector Earnings in Focus
Home Depot (HD - Free Report) became the first major conventional retailer to come out with Q3 results, with the home improvement retailer coming out ahead of estimates, with comps benefiting from hurricanes in the U.S. Southeast. Home Depot’s better-than-expected results notwithstanding, the company’s Q3 earnings were down -1.4% from the year-earlier level on +6.6% higher revenues, as the operating environment continues to depress margins.
Home Depot’s hurricane boost offers a direct read-through for Lowe’s (LOW - Free Report) , which reports on November 19th. Lowe’s Q3 earnings are expected to be down -10.2% from the same period last year on -2.6% lower revenues.
The fortunes of Home Depot and Lowe’s are closely tied to developments in the housing market, where demand remains anemic as a result of elevated mortgage rates. While the Fed has started easing and is broadly expected to remain in the easing lane, long-term interest rates have proved to be a lot stickier relative to short-term rates that are closely tied to Fed activities.
Part of the reason for the stubborn long-term rates appears to be expectations of pro-growth policies from the incoming Trump administration. That said, the expectation is that long-term rates will eventually come down, even though the downshift at the longer end of the yield curve may be a lot less than Fed-driven easing at the lower end of the curve. All of this will be beneficial to Home Depot and Lowe’s as the major home improvement projects typically require outside financing.
Another issue for Home Depot, Lowe’s, and other retailers of big-ticket items has been the post-Covid shift in consumer spending towards leisure, hospitality, and travel type of services. There is some indication that consumers may finally be starting to ease up on that front. If true and not simply a reflection of pre-election jitters, some of those savings will move towards big-ticket items and home improvement projects. We should note also that housing equity remains in record territory and can serve as a readily available dry powder.
Discretionary items have been anemic at Walmart (WMT - Free Report) and Target (TGT - Free Report) as well, with the issue a much bigger headwind at Target given its relatively heavier indexing to that spending category. We will learn more next week when Walmart and Target report results, but the former had noted early signs of improvement in its discretionary merchandise at its last earnings call on August 15th.
Walmart has been a standout outperformer as it has a huge grocery business and is also enjoying gains from the digital platform. Walmart’s ability to gain market share in grocery stores by attracting higher-income households through its convenient e-commerce platform has been at play for some time now.
We have discussed the Retail sector’s earnings scorecard and how the sector’s Q3 results stack up relative to the other recent periods in section 1 of this report.
The Earnings Big Picture
Looking at Q3 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total earnings for the S&P 500 index are now expected to be up +7.6% from the same period last year on +5.6% higher revenues.
The Q3 earnings growth pace would improve to +10.0% had it not been for the Energy sector drag (decline of -22.9% for Energy). On the other hand, quarterly earnings for the index would be up +2.8% once the Tech sector’s hefty contribution is excluded (earnings growth of +19.9% for the Tech sector).
The quarterly earnings growth pace is expected to improve from next quarter onwards.
For the current period (2024 Q4), total S&P 500 earnings are expected to be up +7.7% on +4.9% higher revenues. Q4 earnings would be up +9.7% had it not been for the Energy sector drag.
Estimates for the period have started coming down since the quarter got underway. Still, the pace and magnitude of negative revisions are less than we had seen in the comparable period of Q3.
The expectation is for double-digit earnings growth in each of the next two years, with the number of sectors enjoying strong growth notably expanding from the narrow base we have been seeing lately.
Tech sector earnings are expected to be up +16.8% in 2025, which would follow the sector’s +19.2% earnings growth in 2024. But even excluding the Tech earnings, S&P 500 earnings would be up +12.5% in 2025, with eight of the 16 Zacks sectors expected to enjoy double-digit earnings growth.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Earnings Trends Highlights: Home Depot, Lowe's, Walmart and Target
For Immediate Release
Chicago, IL – November 14, 2024 – Zacks Director of Research Sheraz Mian says, "Earnings growth is expected to accelerate after the modest growth pace in Q3, with double-digit earnings growth projected in three of the next four quarters."
Looking Ahead to Retail Sector Earnings
Note: The following is an excerpt from this week’sEarnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
Retail Sector Earnings in Focus
Home Depot (HD - Free Report) became the first major conventional retailer to come out with Q3 results, with the home improvement retailer coming out ahead of estimates, with comps benefiting from hurricanes in the U.S. Southeast. Home Depot’s better-than-expected results notwithstanding, the company’s Q3 earnings were down -1.4% from the year-earlier level on +6.6% higher revenues, as the operating environment continues to depress margins.
Home Depot’s hurricane boost offers a direct read-through for Lowe’s (LOW - Free Report) , which reports on November 19th. Lowe’s Q3 earnings are expected to be down -10.2% from the same period last year on -2.6% lower revenues.
The fortunes of Home Depot and Lowe’s are closely tied to developments in the housing market, where demand remains anemic as a result of elevated mortgage rates. While the Fed has started easing and is broadly expected to remain in the easing lane, long-term interest rates have proved to be a lot stickier relative to short-term rates that are closely tied to Fed activities.
Part of the reason for the stubborn long-term rates appears to be expectations of pro-growth policies from the incoming Trump administration. That said, the expectation is that long-term rates will eventually come down, even though the downshift at the longer end of the yield curve may be a lot less than Fed-driven easing at the lower end of the curve. All of this will be beneficial to Home Depot and Lowe’s as the major home improvement projects typically require outside financing.
Another issue for Home Depot, Lowe’s, and other retailers of big-ticket items has been the post-Covid shift in consumer spending towards leisure, hospitality, and travel type of services. There is some indication that consumers may finally be starting to ease up on that front. If true and not simply a reflection of pre-election jitters, some of those savings will move towards big-ticket items and home improvement projects. We should note also that housing equity remains in record territory and can serve as a readily available dry powder.
Discretionary items have been anemic at Walmart (WMT - Free Report) and Target (TGT - Free Report) as well, with the issue a much bigger headwind at Target given its relatively heavier indexing to that spending category. We will learn more next week when Walmart and Target report results, but the former had noted early signs of improvement in its discretionary merchandise at its last earnings call on August 15th.
Walmart has been a standout outperformer as it has a huge grocery business and is also enjoying gains from the digital platform. Walmart’s ability to gain market share in grocery stores by attracting higher-income households through its convenient e-commerce platform has been at play for some time now.
We have discussed the Retail sector’s earnings scorecard and how the sector’s Q3 results stack up relative to the other recent periods in section 1 of this report.
The Earnings Big Picture
Looking at Q3 as a whole, combining the actual results that have come out with estimates for the still-to-come companies, total earnings for the S&P 500 index are now expected to be up +7.6% from the same period last year on +5.6% higher revenues.
The Q3 earnings growth pace would improve to +10.0% had it not been for the Energy sector drag (decline of -22.9% for Energy). On the other hand, quarterly earnings for the index would be up +2.8% once the Tech sector’s hefty contribution is excluded (earnings growth of +19.9% for the Tech sector).
The quarterly earnings growth pace is expected to improve from next quarter onwards.
For the current period (2024 Q4), total S&P 500 earnings are expected to be up +7.7% on +4.9% higher revenues. Q4 earnings would be up +9.7% had it not been for the Energy sector drag.
Estimates for the period have started coming down since the quarter got underway. Still, the pace and magnitude of negative revisions are less than we had seen in the comparable period of Q3.
The expectation is for double-digit earnings growth in each of the next two years, with the number of sectors enjoying strong growth notably expanding from the narrow base we have been seeing lately.
Tech sector earnings are expected to be up +16.8% in 2025, which would follow the sector’s +19.2% earnings growth in 2024. But even excluding the Tech earnings, S&P 500 earnings would be up +12.5% in 2025, with eight of the 16 Zacks sectors expected to enjoy double-digit earnings growth.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.