The Zacks Analyst Blog Highlights: Market Vectors Retail ETF, SPDR S&P Retail ETF and PowerShares Retail Fund - Press Releases
For Immediate Release
Chicago, IL – March 03, 2015 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. ETFs recently featured in the blog include the Market Vectors Retail ETF (RTH-Free Report), SPDR S&P Retail ETF (XRT-Free Report) and PowerShares Retail Fund (PMR-Free Report).
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Here are highlights from Monday’s Analyst Blog:
Retail ETFs Hitting 52-Week Highs
The retail sector has been riding higher, outperforming the S&P 500 index on encouraging Q4 earnings. This is especially true as retail stocks gained an average of 2.85% (average price difference between a day before and after the earnings announcement of a stock) versus the 0.77% gain for the broader index in response to earnings announcements, as per the Zacks Earnings Trend.
Total earnings from 93.9% of the sector’s total market capitalization reported so far are up 5.7% on revenue growth of 5.5%, with 76.5% beating earnings estimates and 64.7% beating on the top line. While the earnings growth rate is much higher than Q3 and the four-quarter average, revenue growth is modestly below Q3 but higher than four-quarter average. With respect to beat ratios, both are trending upward when compared to the past four-quarter average.
The robust performance of the sector is primarily driven by higher consumer spending, which rose 4.3% in the fourth quarter, reflecting the fastest pace since 2006. This is especially true as a stronger economy, better job and wage prospects, and lower oil price are leading to fatter wallets and greater spending power (read: Red-Hot Top Ranked Retail ETFs).
Retail Earnings Pushing Stocks Higher
Home Depot, the world's largest home improvement retailer, emerged as the real champion in the Q4 earnings season as the stock climbed as much as 5% to a new 52-week high of $117.92 on the day of its earnings announcement on February 24. The company strongly surpassed the Zacks Consensus Estimate by 11 cents on earnings and by $490 million on revenues. For 2015, it expects revenues to grow 3.5% to 4.7% annually while earnings per share to increase 8.5% to 10% to $5.11 to $5.17. The current Zacks Consensus Estimate is however pegged higher at $5.21.
The second largest home improvement retailer, LOW, surged as much as 2.1% to attain a fresh yearly high of $75.98 following its quarterly results that topped our earnings estimate by a couple of cents and revenue estimates by $248 million. The retailer introduced its revenue and earnings guidance for fiscal 2015. Earnings per share are expected at about $3.29, up from $2.71 earned last year and above the Zacks Consensus Estimate of $3.27. Meanwhile, sales will likely grow 4.5–5% against 5.3% reported in 2014.
Gap also outpaced our estimates on both top and bottom lines and its shares climbed over 3% following its earnings release on February 26 after the closing bell. Earnings of 75 cents beat the Zacks Consensus Estimate by a penny while revenues of $4.708 billion were marginally ahead of our estimate of $4.707 billion. Strong results outweighed the soft earnings outlook of $2.75–$2.80 per share for the fiscal year, which widely missed the Zacks Consensus Estimate of $3.03 (read: Should You Keep Holding the Retail ETFs?).
The big-box retailer, Target, cheered investors topping our estimates on the top and the bottom lines as well as guiding higher. Earnings per share of $1.50 and revenues of $21.7 billion outpaced the Zacks Consensus Estimate of $1.46 and $21.6 billion, respectively. Target projects earnings per share in the range of 95 cents to $1.05 for the ongoing first quarter; the upper-end is in-line with the Zacks Consensus Estimate of $1.05. The stock gained 1.9% and hit a new 52-week high of $78.40 following solid earnings results on February 25.
The Major Dampeners
The department store retailer – JCP – is one of the major dampeners as the stock slid as much as 13.6% on the day following its earnings announcement on February 26 after the closing bell. The struggling retailer has reported break-even results, which fared much better than the adjusted loss of 68 cents reported in the year-ago quarter but far away from the Zacks Consensus Estimate of 14 cents earnings. However, revenues of $3.89 billion were ahead of our estimate of $3.88 billion.
Shares of Wal-Mart, the world's largest retailer, fell about 3.2% on the day of earnings announcement on February 19 after the company missed on revenues and outlined its new wage hike plan for employees that will likely weigh on profitability in the current fiscal year. Though earnings per share of $1.61 beat the Zacks Consensus Estimate of $1.54, revenues of $131.6 billion were below our estimate of $132.2 billion.
The company expects earnings of $0.95–$1.10 and $4.70–$5.05 per share for the first quarter and full year, respectively. Both projections fell shy of the Zacks Consensus Estimate of $1.12 for the first quarter and $5.18 for the full year (read: Wal-Mart Earnings Beat But Wage Hike Bothers: ETFs Gain Focus).
The second largest department store retailer – Macy’s – reported earnings per share of $2.44, which beat the Zacks Consensus Estimate by couple of cents. However, revenues of $9.36 billion missed our estimate of $9.39 billion. The company expects earnings per share of $4.70–$4.80 for the current fiscal year; the mid-point of which is lower than the Zacks Consensus Estimate of $4.85. The stock was down 3.2% on the day of earnings announcement on February 24.
ETFs in Focus
Improved earnings are driving the retail space and ETFs higher. Investors could closely monitor the movement in the products and could tap the potential surge through ETFs. Below, we have highlighted three ETFs that are in focus and could be solid picks for investors given that these have a favorable Zacks ETF Ranks with a Medium risk outlook and improving fundamentals.
Market Vectors Retail ETF (RTH-Free Report)
This fund tracks the Market Vectors US Listed Retail 25 Index and holds about 26 stocks in its basket. It is a large cap centric fund and is heavily concentrated on the top 10 holdings with 63.7% of assets – the largest allocations going to Wal-Mart, Amazon.com and HD. Sector wise, specialty retail occupies the top position with less than one-third share, followed by double-digit allocation to hypermarkets, drug stores, departmental stores, and health care services.
The fund has amassed $291.7 million in its asset base while average daily volume is moderate at 83,000 shares. Expense ratio came in at 0.35%. The product has a Zacks ETF Rank of 1 or ‘Strong Buy’ and hit a new-52 week high of $76.85, gaining 6.8% so far in the year.
SPDR S&P Retail ETF (XRT-Free Report)
This product tracks the S&P Retail Select Industry Index, holding 103 securities in its basket. It is widely spread across each component as none of these holds more than 1.37% of total assets. Small cap stocks dominate more than half of the portfolio while the rest have been split between the other two market cap levels (see: all the Consumer Discretionary ETFs here).
In terms of sector holdings, apparel retail takes the top spot with one-fourth share while specialty stores, automotive retail and Internet retail also have double-digit allocations. XRT is the most popular and actively traded ETF in the retail space with AUM of about $1.2 billion and average daily volume of more than 2.3 million shares. It charges 35 bps in annual fees and added nearly 3% in the year-to-date timeframe to touch a one-year high of $99.07. The fund has a Zacks ETF Rank of 2 or ‘Buy rating.
PowerShares Retail Fund (PMR-Free Report)
This retail fund provides diversified exposure across various market caps with 46% in large caps, 37% in small caps and the rest in mid caps. This is easily done by tracking the Dynamic Retail Intellidex Index. The fund has accumulated just $23.9 million in its asset base while trades in light volume of under 10,000 share a day. The ETF charges 63 bps in fees per year.
In total, the product holds 29 securities with none accounting for more than 5.75% of assets. In terms of industrial exposure, specialty retail takes the top spot at 42%, while food retail (19%) and hypermarkets (12%) round off the top three positions. PMR hit a new high of $40.23, having gained about 3% in the year-to-date timeframe and has a Zacks ETF Rank of 3 or ‘Hold’ rating.
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