Zacks Earnings Trends Highlights: Home Depot, Target, Wal-Mart and Macy's - Press Releases
For Immediate Release
Chicago, IL – May 21, 2015 – Zacks Director of Research Sheraz Mian says, "The Q1 earnings season has effectively come to an end, with even the Retail sector’s results now mostly behind us."
Q1 Earnings Season Winding Down
The Q1 earnings season has effectively come to an end, with even the Retail sector’s results now mostly behind us. The sector had a good run earlier on when most of the results were from restaurants and online operators. But the picture started turning negative as reports from the department stores and bi-box retailers came out. While we did see positive results a few major players like Home Depot (HD) and Target (TGT), sector bellwethers like Wal-Mart (WMT) and Macy’s ( M) came up short of expectations. Overall, the Retail sector’s performance comparison is at best mixed relative to other recent periods, which isn’t bad given the broad-based weakness in most other sectors.
Including today’s Retail sector earnings reports, we now have Q1 results from 32 of the 41 retailers in the S&P 500 index that combined account for 90.8% of the sector’s total market capitalization in the index. Total earnings for these retailers are up +4.6% on +5.7% higher revenues, with 75.0% beating EPS estimates and 46.9% coming ahead of revenue estimates.
Q1 Scorecard (as of May 20th, 2015)
Total earnings for the 475 S&P 500 members that have reported results already are up +2.4% on -3.4% revenues, with 65.0% beating EPS estimates and only 44.0% coming ahead of top-line expectations.
As we have stated repeatedly in this space since the start of this reporting cycle, this is weak performance compared to what we have seen from the same group of 475 S&P 500 members in other recent periods.
Three things stand out as we look at the results thus far:
First , the revenue weakness is very notable. We knew that growth will be problematic in Q1, so the weak revenue growth rate of -3.4% compared to other recent periods isn’t that surprising. But the very low proportion of companies beating revenue estimates is surprising and likely indicative that the growth backdrop has been even weaker than what was reflected in consensus estimates.
Second , the earnings growth rate (+2.4%) is also weak relative to what we saw from the same group of companies in 2014 Q4 and the 4-quarter average. While the Finance sector has been a positive growth contributor, the Energy sector’s impact has been in the opposite direction. Excluding contribution of these two sectors, the Q1 growth picture still compares to unfavorably other recent periods.
Third , as has been the norm in recent quarters, management teams continue to guide lower for the current and following quarters. As a result, estimates for the current quarter, which had fallen quite a bit already in solidarity with the Q1 estimate cuts, have started coming down even more.
The dollar issue has added to the Energy sector’s woes and some concerns about the U.S. economic picture in bringing down this year’s estimates. Current consensus estimates show earnings growth for the S&P 500 to be in the negative for the first three quarters of the year, with the growth rate for the full-year now modestly in the negative. The expectation is that the growth picture starts improving in the last quarter of the year, with the growth pace ramping up to double-digit rates in 2016.
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