More Earnings Reports to Watch from the Retail Sector: DG, WSM, ULTA & BKE

 

The earnings season has pretty much come to an end, but there are still some big names left to post their quarterly numbers, including some big retailers scheduled to report this week.

With the earnings season all but finished, we can now take a look back at the overall results, and it turned out to be a pretty positive season. Around 70% of companies reported positive earnings surprises and slightly over 60% were able to post better than expected sales for the quarter.

Earnings growth, which has been a concern for Wall Street was 13.1%, which marked the fifth straight quarter with double-digit earnings growth. For the full year 2019, analysts expect earnings to slow to around 5%, but that figure could be understated if the next couple of quarters sees as many positive earnings surprises as the most recent quarter.

For the most part, retail has been a bright sector, with strength in the overall economy and high consumer confidence boosting the sector. Most retailers have already posted their quarterly numbers, but there are still a handful left to report, including the following four names.

Dollar General (DG)

Discount retailer Dollar General (DG) is expected to report its fourth-quarter results before the market open on Thursday. Analysts have forecast earnings of $1.87 per share, but the street has a slightly higher whisper number for the quarter of $1.88. The consensus calls for sales of $6.6 billion for the quarter. During the same period last year Dollar General had earnings of $1.48 and sales of $6.1 billion. Earlier this month Dollar Tree (DLTR) posted better than expected numbers on the top and bottom line which pushed that stock higher and indicates a strong quarter for Dollar General as well. DG is already trading just shy of its all-time high, but its valuation remains attractive with a forward P/E of 18 and earnings expected to rise 15% per annum over the next five years, following five years of 12% annual growth. The stock is trading at $119.51, which is in-line with the $119.59 average price target that analysts have on the stock but following a positive earnings surprise analysts will likely boost their targets to allow shares to build on recent gains.

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Williams-Sonoma (WSM)

Home goods retailer Williams Sonoma (WSM) is scheduled to release its fourth-quarter numbers after the market close Wednesday. Analysts forecast earnings of $1.97 per share on revenue of $1.8 billion. The street is expecting a small earnings beat for the quarter with a whisper number of $2.00. During the same period last year the company had earnings of $1.68 and revenue of $1.68 billion. The company has a positive earnings track record with better than expected profits each of the last four quarters, but sales fell just shy of the consensus last quarter after five straight beats. WSM sold off during the final months of 2018, but the stock hit a bottom in December and has risen 26% from its 52-week low. Concern over rising interest rates and its impact on the housing market and related stocks has subsided with the Federal Reserve lowering its expected number of increases in 2019 to just two rate hikes. WSM has shown modest annual earnings growth of 5% over the last five years, but analysts see better times ahead and estimate profits to rise at an average annual rate of 9% over the next five years. The stock currently has a forward P/E of 12.7. The stock trades at $56.83 with an average price target of $57.29.

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Ulta Beauty (ULTA)

Ulta Beauty (ULTA) reports fourth-quarter earnings after the market close Thursday. Analysts forecast earnings of $3.55 on revenue of $2.13 billion. During the same period last year the company reported earnings of $2.75 per share on sales of $1.94 billion. The street is looking for a small earnings beat with a whisper number of $3.58 for the quarter. Ulta has posted positive earnings surprises the last three quarters, while sales have fallen in-line with estimates for two straight quarters. The stock is currently trading just shy of its all-time high. ULTA’s valuation is a bit of a concern with shares trading with a forward P/E of 24, but the valuation should not prevent the stock from moving higher as long as the company is able to continue posting in-line or better than expected numbers moving forward. Over the last five years the company has shown annual earnings growth of 27%,and looking ahead analysts forecast profit growth of 19.5% per annum for the next five years. The strong growth numbers should keep the stock moving in the right direction barring any negative surprises. Analysts have an average price target of $312.53 with shares currently trading at $312.53.

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The Buckle (BKE)

Apparel, footwear and accessories retailer The Buckle (BKE) reports its fourth-quarter results before the market open on Friday. Analysts expect the company to report earnings of $0.80 per share on sales of $264.4 million. During the same period last year the company reported earnings of $0.87 and had sales of $281.2 million. The drop in earnings and sales has already been priced into the stock, so shares should not take a big hit on the lower numbers as long as the results fall in-line or better than expected. Buckle missed on both the top and bottom line last quarter which drove the stock to a 52-week low in December of $16.85, but BKE has recovered and the stock is up 13.5% from its low. BKE recently tested a major resistance level at $19.50 and failed to break through, but if the company is able to post better than expected Q4 numbers the stock should easily trade above $19.50 and start to use that as a new support level moving forward. Retailers have shown strength this quarter, and Buckle needs to follow suit for the stock to build on its recent gains. BKE trades at just 9.6 times earnings and 102 times forward earnings so there is a lot of upside potential on the heels of a positive report. However, earnings are shrinking, with profits are down 17% per annum over the last five years. Looking ahead the picture looks a little better, but analysts see more earnings shrinkage and forecast profits will fall at an annual rate of 10.9% over the next five years. If the company is able to start showing consistent earnings beats the stock has a lot of upside, but shares will struggle to rise until the market regains some confidence in the retailer. BKE is currently trading at $19.11 with an average price target of $16.00.

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Symbols: BKE DG ULTA WSM

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