The Q3 earnings season has been grabbing eyeballs not only because it is turning out to be an encouraging one after five straight quarters of earnings declines but it has also coincided with the much-talked about Presidential election wherein Donald Trump triumphed over Hillary Clinton. We are almost at the tail end of the reporting cycle, with the Retail/Wholesale sector in the limelight.
Per our Earnings Preview report as of Nov 11, out of the 455 S&P 500 companies that have come up with their quarterly numbers, approximately 72.7% posted positive earnings surprises, while 55.4% beat top-line expectations. Total earnings for these index members were up 3.9% from the year-ago quarter, while revenues increased 2.7%. The report projects that earnings for the total S&P 500 companies will improve 3.4% from the year-ago period, with total revenue rising 1.5%.
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. Of these, Auto, Oil/Energy and Transportation are likely to be a major drag. However, the Retail/Wholesale sector is witnessing a significant improvement.
Out of 43 retail companies, 24 have posted a positive earnings surprise of 54.2%, while 37.5% beat revenue expectations. While total earnings for these 24 retailers were up 12.7% from the year-ago quarter, revenues increased 8.6%.
Total earnings for the Retail/Wholesale sector are estimated to rise 5.9%, whereas revenues are projected to improve 5.2%. So, let’s see what awaits the following apparel stocks within the Retail/Wholesale sector that are queued up for earnings releases on Nov 18.
Foot Locker, Inc. (FL - Free Report) has surpassed the Zacks Consensus Estimate by an average of 3.1% in the trailing four quarters.
Our proven model shows that Foot Locker is likely to beat earnings estimates in third-quarter fiscal 2016. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
This retailer of athletic shoes and apparel has an Earnings ESP of +0.90% as the Most Accurate estimate is at $1.12 while the Zacks Consensus Estimate is pegged at $1.11. Also, the company carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Foot Locker’s stellar performance in second-quarter fiscal 2016 was backed by effective implementation of its operational and financial initiatives. We believe that the company is likely to gain by persistently utilizing opportunities like kids’ and women’s business, shop-in-shop expansion in collaboration with its vendors, store banner.com business, store refurbishment and enhancement of assortments. (Read more: Foot Locker to Post Q3 Earnings: A Beat in the Cards?)
Next, let’s take a sneak peek at The Buckle, Inc. (BKE - Free Report) , a retailer of casual apparel, footwear and accessories which has missed the Zacks Consensus Estimate by an average of 3.1% in the trailing four quarters.
Buckle has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 51 cents. Moreover, the company carries a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Buckle has not been able to turn the performance of its struggling Women’s business around. Moreover, a competitive retail landscape and cautious consumer spending have been weighing upon the company’s results. These factors might impact its third-quarter fiscal 2016 performance. (Read more: Buckle Q3 Earnings: Stock Likely to Disappoint?)
Finally, let’s see what’s in store for Abercrombie & Fitch Co. (ANF - Free Report) , which has delivered negative surprises of 8.7% and 18% in the second and first quarters of fiscal 2016, respectively.
This specialty retailer of premium, high-quality casual apparel for men, women and kids has an Earnings ESP of +5.26% as the Most Accurate estimate is at 20 cents while the Zacks Consensus Estimate is pegged at 19 cents. The company carries a Zacks Rank #4 (Sell).
Abercrombie has been posting dismal results for a while now, bearing the brunt of soft traffic trends in its U.S. flagship and tourist stores. Also, the company remains prone to adverse currency movements, as over a quarter of its total revenue comes from overseas operations. (Read more: Abercrombie Q3 Earnings: What's in Store this Time?)
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