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4 Retailers Set to Stand Tall This Earnings Season

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The Retail-Wholesale sector’s prospects are correlated with the purchasing power of consumers. Well consumers remain in good shape, courtesy of a solid job market as evident from the 50-year low unemployment rate of 3.5% in September.

Players in the sector are gaining strength from efforts to grab a bigger share on attributes such as price, products and speed to market. These apart, enhancement of omni-channel capacities, introduction of new brands, refurbishment of stores, introduction of loyalty and marketing programs, and expansion of same-day delivery options have also been playing crucial roles. Focus on these areas have aided brick-&-mortar retailers to better compete with e-commerce players.

These efforts have been driving the top line of the players in the sector for quite some time now and the to-be-reported quarter is unlikely to be an exception. However, it is to be seen how efficiently retailers manage their margins in the wake of rising operating costs. Moreover, any deleverage in SG&A rate, higher labor and occupancy costs, and increased marketing and other store-related expenses remain added concerns.

Per the latest Earnings Outlook, Retail-Wholesale sector is anticipated to witness top-line growth of 8.4% with bottom line expected to decline 0.5%. That said, let’s check out the probability of four retailers to beat earnings estimates this reporting cycle.

Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

4 Prominent Picks

Investors can count on Zumiez Inc. (ZUMZ - Free Report) , which has a Zacks Rank #1 and an Earnings ESP of +1.67%. The Zacks Consensus Estimate for third-quarter fiscal 2019 is pegged at 60 cents, suggesting growth of 8.5% from the year-ago reported figure. This specialty retailer of apparel, footwear and accessories has an average positive earnings surprise of 60.9% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

You may also consider RH (RH - Free Report) with a Zacks Rank #1 and an Earnings ESP of +1.36%. The Zacks Consensus Estimate for the third quarter of fiscal 2019 is pegged at $2.21, suggesting growth of 27.5% from the prior-year quarter. This home furnishings retailer has outperformed the Zacks Consensus Estimate by an average of 20.2% in the trailing four quarters.

Dollar General Corporation (DG - Free Report) with a Zacks Rank #2 and an Earnings ESP of +0.73%, also deserves a place in your portfolio. The Zacks Consensus Estimate for the third quarter of fiscal 2019 is pegged at $1.38, indicating an improvement of about 9.3% from year-ago period. This discount retailer has outperformed the Zacks Consensus Estimate by a decent margin in the preceding two quarters.

Another lucrative option is Target Corporation (TGT - Free Report) , which offers beauty and household essentials, food assortments, apparel and home decor products. The stock has a Zacks Rank #2 and an Earnings ESP of +2.56%. The Zacks Consensus Estimate for the for the third quarter of fiscal 2019 is pegged at $1.17, indicating year-over-year improvement of 7.7%. The company has an average positive earnings surprise of 4.6% in the trailing four quarters.

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