The earnings season is winding down, but there remains many big names left to report and this week features quarterly reports from some major retailers.
So far the earnings season has been a decent one, but the market is definitely concerned that earnings growth is slowing which has brought volatility into the market despite the majority of companies reporting posting better than expected profits.
This week focus will be on the retail sector as several big retailers are scheduled to release their quarterly results. Since retail makes up such a huge portion of the overall economy, retail earnings always garner a lot of Wall Street attention and given the recent market volatility they are as important as ever.
We are in the middle of the all-important holiday shopping season which puts even greater importance on retail earnings. Retail has to remain strong for investors to remain upbeat on the overall economy, and this week’s reports will have a ripple effect on the broader market.
Whether the impact is a positive or negative one remains to be seen as the following retailers line up to report their most recent results.
Off-priced retailer Burlington Stores (BURL) has been a strong outperformer over the last five years, but shares have trended steadily lower since hitting a new all-time high on November 14. The stock has fallen 17% in the last two weeks and is still looking for a solid support level. The company reports before the market opens on the 28th and a good report should bring some stability and help BURL erase some of its recent losses. Valuation was a concern when the stock was at its record high, but the recent stock dip has pulled its forward P/E to a respectable 21, which is fair considering anaLysts expect earnings growth of 42% this year and 22% per annum over the next five years. Traders are looking for a better than expected report with a whisper number of $1.12 versus the consensus $1.06. During the same period last year BURL earned 70 cents per share. BURL is trading at $150.33 with a $176.82 average price target.
Discount retailer Dollar Tree (DLTR) sold off sharply at the start of the year, and the stock has yet to regain strength. The stocks inability to regain its footing can be tied to three straight disappointing quarterly reports. There are good reasons to be optimistic on the stock. Earnings are still rising, and analysts expect profit growth of 10.6% annually over the next five years. The stock’s valuation is attractive with a forward P/E of 13.7 which would allow for a lot of upside if the company is able to start topping estimates. The street is not very optimistic about the upcoming report with a whisper number of $1.14, which is a penny lower than the $1.15 consensus. The company reports Thursday before the market open. The good side of the lower whisper number is that a small miss has already been priced into the stock and should the actual figure hit the whisper the stock should not get hit too hard on the small miss. The expected miss also puts the stock in a good position to stage a strong rally if Dollar Tree is actually able to hit the estimate or post a small earnings beat. DLTR is trading at $82.91 with a $97.95 average price target.
Upscale retailer Tiffany (TIF) reports its third-quarter numbers ore the market open Wednesday. Analysts forecast earnings of 76 cents per share, but the street has a higher number in mind with a whisper number of 81 cents. During the same period last year the company earned 80 cents. Tiffany has a great earnings track record having posted better than expected earnings and sales each of the last eight quarters. The stock started to slide over the summer and is still in search of a solid level of support. An upbeat earnings report could stop the downward trend and allow for investors to start making back some of their recent losses .TIF has a forward P/E of 19 with earnings expected to rise 11.5% per annum over the next five years. The stock has an average price target of $139.58 and is currently trading at $105.92.
Abercrombie & Fitch
Specialty retailer Abercrombie & Fitch (ANF) will report its third-quarter figures before the market open Thursday. Analysts have a consensus 18 cents per share forecast for the quarter, and the street’s whisper number is the same. Abercrombie & Fitch is in the very competitive and challenging teen fashion retail sector where trends can change much more dramatically and rapid than the overall fashion sector, so its quarterly numbers help paint a clearer picture on which retailers are in favor with the highly coveted teen demographic. ANF is also primarily a mall-based retailer, which poses its own set of challenges. The stock is currently trading just above its 52-week low with a lot of negativity priced in. The amount of negativity already priced into the stock creates a situation where shares could stage a big rally if the retailer is able to deliver higher than expected numbers. Last quarter Abercrombie posted mixed quarter numbers with sales falling a little short of the consensus. This quarter the company will need to show strength on both the top and bottom line for traders to regain optimism in the stock. Analysts do see upside in the stock with an average price target of $21.62 versus its current $16.36 price.
Dick’s Sporting Goods
Dicks Sporting Goods (DKS) took a beating in 2017, but the stock regained its footing late in the year and moved strongly higher during the first half of 2018 before trading sideways during the second half of the year. The market is concerned about the company’s modest earnings growth, with profits expected to rise just 4.3% during the current year, and by a low 0.7% annually over the next five years. With the low growth estimates, it is not surprising to see a low valuation with the stock showing a forward P/E of just 10.8. The low valuation limits the downside risk, but unless the company is able to consistently put up better than expected numbers moving forward it will be hard to justify the stock gaining too much in share price. Dick’s has posted better than expected profits the last four quarters, but sales fell short of estimates twice during that time period, most recently last quarter. The sales misses have kept a ceiling on the stock and the athletic retailer will need better than expected numbers on both the top and bottom line for the stock to enjoy future gains. Traders expect a nice earnings beat with a whisper number of 30 cents versus the consensus 26 cents, which would be in-line with the same period last year. Dick’s will report its quarterly numbers before the market open on Wednesday. DKS stock is currently trading at $35.79 and analysts have an average price target of $38.95.