With the third-quarter earnings season nearing its last leg, results from a major chunk of the S&P 500 companies are out. While majority releases from the Retail/Wholesale sector are still awaited, the overall reports so far indicate that this quarter clearly stands out, as it has witnessed earnings growth after five straight quarters of decline.  

Per our latest Earnings Preview report (as of Nov 4, 2016), 423 S&P 500 members – that collectively account for 84.6% of the index’s total membership – reported earnings results. Total earnings for these index members rose 3.6% while revenues increased 2.4%, with 72.8% beating EPS estimates and 55.1% surpassing revenue expectations.

Further, the report projects that earnings for the total S&P 500 companies will improve 3% from the year-ago period with total revenue rising 1.5%. In second-quarter 2016, earnings for the S&P 500 companies declined 2.8%, whereas revenues dipped 0.2%.

However, the performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, four are expected to witness an earnings decline in the third quarter, with Autos, Oil/Energy and Transportation being a big drag. However, the Retail/Wholesale sector, which houses departmental store chains, is witnessing an improvement despite overseas turmoil, fluctuating commodity prices and the Fed’s pending decision over the rate hike.

Evidently, nearly 41.9% of the Retail/Wholesale members have reported results, of which 50% beat on earnings and 27.8% outpaced revenue estimates. Moreover, total earnings for these companies were up 9.5% year over year, with revenues climbing 7.5%. Further, we expect to see 4.7% growth in earnings and a 5.2% rise in sales for the Retail/Wholesale sector in third-quarter 2016.

All said, let’s take a sneak peek at two departmental store companies slated to release their quarterly numbers on Nov 10.

We expect one of the leading department store retailers, Macy's, Inc. (M Quick QuoteM - Free Report) to beat expectations when it reports its third-quarter fiscal 2016 results. This is because Macy’s now carries an Earnings ESP of +2.50%, as analysts seem to have bumped up their estimates before the earnings results. Earlier, the company had an Earnings ESP of 0.00%, which kept us uncertain of a positive surprise. The stock holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

We believe Macy’s sustained focus on price optimization, inventory management, merchandise planning and private label offering act as the primary catalysts. In an attempt to augment sales, profitability and cash flows, the company has been taking steps such as integration of operations as well as development of its eCommerce business and Macy’s Backstage off-price business. Further, it is carrying out the expansion of Bluemercury and online order fulfillment centers. (Read more: Macy's Q3 Earnings: Can the Stock Pull a Surprise?).

Moving to Kohl’s Corporation (KSS Quick QuoteKSS - Free Report) , we are skeptical of this specialty retailer’s third-quarter fiscal 2016 results. Kohl’s carries a Zacks Rank #4 (Sell), which coupled with its Earnings ESP of 0.00%, makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Kohl’s has been struggling to boost its sluggish top line since the past many quarters. Despite the company’s continuous efforts to improve business, its strategic initiative ‘Greatness Agenda’ has been showing weakness of late, with comparable store sales (comps) for the first two quarters of fiscal 2016 trending downward. The sluggish comps and a difficult retail sales scenario are hurting sales at department stores. Also, management slashed its earnings and sales guidance for fiscal 2016 due to soft comps. Additionally, the company remains cautious about its fiscal 2016 results and plans to close 18 stores due to retail uncertainty as well as cautious spending by U.S. consumers. (Read more: Will Sluggish Comps Dampen Kohl's Earnings in Q3?)

Check later on our full write-up on earnings releases of these stocks.

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