The earnings season is quickly coming to an end, and so far it has been a good one. This week’s reports will center mostly around retailers and big department stores.
Given retail’s importance to the overall economy, the market always pays close attention to what is happening in the retail space to get a better insight into overall economic conditions.
Big retailers Macy’s (M) and Dillard’s (DDS) have already reported this week with positive results, pushing both stocks higher and boosting optimism for the rest of the reports coming from retailers later in the week.
We also get a report from a large hotel and resort operator which will shine even more light on the state of the overall economy.
This will be an important week that will set the tone for the market as we exit out of the earnings season. Let’s take a look at five stocks that the market will watch closely as they report their most recent quarterly numbers.
Show maker Crocs (CROX) will report its fourth-quarter results before the market open this Thursday. Analysts expect to see the company report a loss for the quarter of 22 cents per share and revenue of $213.4 million. During the same period last year the company lost 41 cents per share and reported revenue of $199.1 million. CROX has been a strong performer over the last year, and the stock avoided for the most part the December selloff that hit the overall market. While Crocs has endured average annual earnings drops of 9.7% over the last five years, analysts see upside in the future and forecast per annum earnings growth of 10% for the next five years, including 189% growth next year. The stock trades at a high P/E of 116, but with earnings expected to rise the forward P/E is a much more respectable 26. The quarterly loss has already been priced into the stock so there is upside potential if the company is able to deliver in-line or better than expected numbers for the quarter. The street expects a positive earnings surprise with a whisper number for a loss of 19 cents. CROX trades at $28.02 with an average price target of $30.25.
Specialty retailer Nordstrom (JWN) reports fourth-quarter numbers after the market close Thursday. Strong numbers from Nordstrom competitors Macy’s (M) and Dillard’s (DDS) already this earnings season is a positive indicator for Nordstrom’s upcoming report. JWN took a big hit following a wide earnings miss in November, and the stock is currently trading just above its 52-week low. The recent weakness has lowered the stock’s valuation and shares are trading with a forward P/E of just 12.3. Nordstrom is forecast to report earnings of $1.42 per share on revenue of $4.63 billion, versus earnings of $0.89 and sales of $4.7 billion during the same period last year. The stock’s valuation should prevent another major selloff if the results fail to hit the consensus, but there is a lot of negativity in the stock at this point so a positive surprise could result in a strong rally. JWN is trading at $45.21 with an average price target of $53.86.
The Gap (GPS)
Specialty retailer The Gap (GPS) will report its Q4 numbers after the market close Thursday. Analysts forecast earnings of 68 cents per share on revenue of $4.72 billion, versus earnings of 61 cents and sales of $4.8 billion during the same period last year. The stock has greatly underperformed the market over the last year, and shares are currenty trading just pennies above their 52-week low. The company has struggled to grow profits in recent years, with earnings down at an average annual rate of 4.4% percent over the last five years. Analysts see improvement in the future and forecast earnings growth of 10% per annum over the next five years, but there is a lot of negativity in the stock and until the company is able to prove its ability to grow the bottom line that negativity will likely remain. GPS does offer an attract valuation with shares trading at just 10 times earnings and 9.4 times future earnings, so the downside should be limited barring a huge miss on either the top or bottom line. The company has posted better than expected earnings and revenue the last two quarters and the street expects another small earnings beat with a whisper number of 69 cents for the quarter. The retail sector had a good earnings season, and if The Gap is able to deliver the stock should start to recover and erase some of its recent losses. GPS is trading at $24.81 with an average price target of $29.73.
L Brands (LB)
L Brands (LB) is the parent company behind retail chains Victoria’s Secret and Bath & Body Works. The stock is trading at 10 times earnings and is in the lower end of its 52-week range. L Brands will report fourth-quarter numbers after the market close Wednesday with the consensus calling for earnings of $2.06 per share and sales of $4.85 billion. The estimates are roughly in line with the same period last year when L Brands earned $2.11 per share on revenue of $4.82 billion. We have seen a lot of positive earnings surprises in the retail sector so far this earnings season and the street expects L Brands to post better than expected numbers with a whisper number of $2.11. Earnings are down 15% per annum over the last five years and while analysts believe earnings will not drop more over the next five year the forward estimates only call for earnings growth of 1% per annum over the next five years. The near flat future growth estimates will make it hard for the stock to regain its strength unless the company is able to consistently top estimates moving forward. LB has beat estimates on the top and bottom line each of the last three quarters, and it will take another set of solid numbers to breathe some life into the struggling stock. LB trades at $27.40 with an average price target of $33.90.
Hotel and resort operator Marriott (MAR) reports its fourth-quarter results after the market close Thursday. The consensus calls for earnings of $1.40 per share, and revenue of $5.61 billion. During the same period last year the company had earnings of $1.12 and sales of $5.88 billion. After hitting a 52-week low in December the stock has rallied and is up 29 percent from its December low. Marriott has enjoyed average annual earnings growth of 23 percent over the last five years and looking ahead analysts forecast per annum earnings growth of 18 percent for the next five years. The stock trades at 20 times future earnings. Overall economic conditions remain upbeat for the travel and tourism sector which should help MAR deliver solid quarterly numbers. Marriott has not missed an earnings estimate since the fourth quarter 2013, and the street expects that streak to continue with a whisper number of $1.45 for the most recent quarter. MAR trades at $129.31 with an average price target of $129.85.