Retail Earnings are Center Stage This Week: BURL, COST, KR, ANF & MRVL

 

The earnings season is nearing an end, but there are still a lot of big names left to report and this week’s reports feature some big retailers.

The overall mood on Wall Street has been positive this earnings season, and the retail sector has produced some big winners so far. This week will be another test for the sector which so far has benefited from strong consumer confidence and strength in the overall economy.

Right now, the market is still looking for direction. After the December correction strength returned to the major indexes, but the current strength remains very fragile and at this time is highly dependent on the hopes of a trade deal being reached between the U.S. and China that would see tariffs lifted as opposed to increase as the two nations try to iron out their differences.

Any hint of a possible deal on the horizon has been pushing stocks higher, only to see stocks give back those gains as optimism falls. The market remains volatile, and each earnings report has the potential to gap stocks sharply higher or lower depending on the quarterly results.

This week’s previews feature retail with a chipmaker also in the mix. Whether or not you own any these stocks you should monitor their results as each has the potential to drive sentiment in the overall market.

Burlington Stores (BURL)

Burlington Stores (BURL) will report its fourth-quarter earnings before the market open on Thursday. BURL has been trading sideways over the last six months, with the stock currently just shy of its all-time high. Analysts expect to see the off-price retailer post Q4 earnings of $2.76 per share on revenue of $2.03 billion. The company has a great earnings track record, having posted positive earnings surprises the last 14 straight quarters. The street expects that streak to continue with a whisper number of $2.81 for the quarter. Burlington Stores has shown a lot of strength in recent years, with profits rising 32 percent per annum over the last five years. Analysts expect to see profits continue to climb at an average annual rate of 22 percent for the next five years. Given the strong growth forecast, the stock’s forward P/E of 23 makes its reasonably priced and with potential to continue building on its recent gains. BURL trades at $166.16 with an average price target of $176.76.

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Costco (COST)

Membership wholesale club Costco (COST) reports fiscal second-quarter numbers after the market close on Thursday. Analysts forecast earnings of $1.67 per share on revenue of $35.65 billion. During the same period last year the company earned $1.59 on revenue of $33 billion. COST took a hit with the overall market in December, and while shares have started to recover the stock remains well below where it was trading before the December market correction. Costco has shown decent earnings growth over the last five years of 10.4 percent per annum, and analysts expect much of the same moving forward with forecast earnings growth of 10.6 percent annually for the next five years. The company posted better than expected numbers on both the top and bottom line last quarter, and the street expects another earnings beat for Q2 with a whisper number of $1.69. COST is currently trading at $216.45 with an average price target of $240.33.

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Kroger (KR)

Grocery chain Kroger (KR) is scheduled to release its fourth-quarter numbers before the market open on Thursday with the consensus calling for earnings of $0.53 per share on revenue of $28.08 billion. During the same period last year the company reported earnings of $0.63 on sales of $31.03 billion. Kroger has a decent earnings track record, with positive earnings surprises the last three quarters. The street expects an in-line report this quarter with a whisper number of $0.53. KR stock has been stuck in a tight sideways trend for the last six months, and the stock is currently trading at just 6.5 times earnings. Earnings growth has been modest with profits up just 6.8 percent per annum over the last five years and analysts expect to see earnings rise at an annual rate of 5.8 percent over the next five years. The grocery space is very competitive and there is fear over how much Amazon.com (AMZN) will disrupt the space as it looks to grow its share of the market. Analysts see some upside in the stock with an average price target of $30.63 versus its current price of $28.70.

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Abercrombie & Fitch (ANF)

Specialty retailer Abercrombie & Fitch (ANF) is set to report its fourth-quarter numbers before the market open Wednesday. The consensus calls for earnings of $1.13 per share and revenue of $1.14 billion, down from $1.38 and sales of $1.19 billion during the same period last year. The stock has trended higher since its last quarterly report that topped estimates on both the top and bottom line, but the stock can be very volatile around earnings and could quickly fall to its November 52-week low on any sign of weakness. The market expects a positive report with a whisper number of $1.18, but the high whisper number puts a lot of pressure on ANF to deliver a big beat for the stock to maintain its current momentum. The retail sector has been reporting decent numbers with The Gap (GPS) posting strong earnings and gapping sharply higher for its most recent quarter on February 28. ANF has a solid level of resistance at 22.50 and a strong set of quarterly numbers should allow the stock to break through resistance and begin to use $22.50 as a new support level moving forward. ANF trades at $21.50 with an average price target of $19.75 but if we see another set of strong numbers analysts are likely to revise their estimates upward to allow the stock to trade higher. ANF has a forward P/E of 19.4.

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Marvell Technology (MRVL)

Chip maker Marvell Technology (MRVL) reports fourth-quarter numbers after the market close on Thursday. The company is expected to post earnings of $0.25 per share on sales of $739 million. Marvell earned $0.32 per share and had sales of $615 million during the same period last year. MRVL showed weakness in the latter part of 2018 along with the overall tech sector. The chip sector in particular was hard hit during the final months of the year as the trade war between the U.S. and China raised concerns over future demand for the sector. As expectations of a deal between the two nations has increased strength has returned to the sector, and MRVL has appreciated 40 percent from its 52-week low in December. Marvell posted better than expected numbers on both the top and bottom line last quarter, and the street expects a small earnings beat this quarter with a whisper number of $0.26 for the quarter. Analysts remain upbeat on the stock, and the 26 analysts that cover the stock have an average price target of $23.74, suggesting the stock has another 19% upside potential.

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Symbols: ANF BURL COST KR MRVL

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