For Immediate Release
Chicago, IL – November 19, 2018 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Nordstrom (JWN - Free Report) , Wal-Mart (WMT - Free Report) , Macy’s (M - Free Report) , Target (TGT - Free Report) and Amazon (AMZN - Free Report) .
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Pullback in Retail Stocks Reflects Elevated Expectations
A big reason for the market’s disappointment with Retail sector earnings reports in recent days is elevated expectations that otherwise solid profitability and same-store sales numbers didn’t quite satisfy. Many of these stocks had done pretty well in the run up to these reports, with the earnings reports providing investors an opportunity to cash in their gains.
The Nordstrom report had legitimate weak spots that justify the sell-off, but the pullback in the Wal-Mart and Macy’s stocks in response to otherwise strong and reassuring results fall in the ‘sell-the-news’ bucket. It is reasonable to expect this behavior to continue with this week’s reports from Target and others.
In terms of the Retail sector scorecard, we now have Q3 results from 63.2% of the retailers in the S&P 500 index. Total earnings for these Retail sector companies, which in addition to including the likes of Macy’s and Wal-Mart also includes online vendors like Amazon and restaurant operators, are up +30.5% on +6.9% higher revenues, with 91.7% beating EPS estimates and 70.8% beating revenue estimates. The comparison charts below put the sector’s Q3 results in a historical context.
With respect to the sector’s growth, Amazon’s blockbuster numbers, particularly on the revenues front, has a big role in the very strong growth picture at this stage, even though the online retail giant’s results disappointed the market.
Q3 earnings growth is still very strong, but the revenue growth rate is a lot lower on an ex-Amazon basis.
Q3 Earnings Season Scorecard (as of Friday, November 16th)
We now have Q3 results from 464 S&P 500 members or 92.8% of the index’s total membership. Total earnings for these 464 companies are up +25.7% from the same period last year on +8.4% higher revenues, with 78.7% beating EPS estimates and 64% beating revenue estimates.
The proportion of these companies beating both EPS and revenue estimates is 53.7%.
Here are the four takeaways:
· Q3 earnings growth for these 464 index members at +25.7% is just a shade better than what we had seen from the same group of companies in the preceding period, but represents an improvement over other recent periods.
· Revenue growth for these 464 index members at +8.4% is tracking below what we had seen in the preceding period, but represents an improvement over other recent periods.
· EPS beats at 78.7% is below what we had seen from the same group of 464 index members in the preceding period, but is in-line with historical periods.
· Revenue beats at 64% is tracking below historical periods. The fact is the proportion of positive revenue surprises is the lowest since the fourth quarter of 2016.
For Q3 as a whole, combining the actual results with estimates for the still to come companies, total earnings are on track to be up +25.3% from the same period last year on +8.3% higher revenues. Earnings growth in Q3 has been steadily going up, now very close the preceding quarter’s +25.4% pace, which was the highest quarterly growth pace in more than 7 years.
As pointed out in this space in recent weeks, estimates for the current period (2018 Q4) have been steadily coming down.
For more details about the overall earnings picture and the Q3 earnings season, please check our weekly Earnings Trends report.
Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview.
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