Zacks Earnings Trends Highlights: Wal-Mart, Target, Apple, Citigroup and J.P. Morgan - Press Releases
For Immediate Release
Chicago, IL – February 20, 2015 – Zacks Director of Research Sheraz Mian says, "Retail earnings gains aren’t as pronounced as one would expect from the market’s favorable reaction to the sector results thus far."
Is Oil's Pain Retail's Gain?
The Retail sector dominates the later part of each reporting cycle and that has been the focus lately in the ongoing Q4 earnings season as well.
There is some improvement in the sector’s earnings picture, likely a function of lower oil prices. But the gains aren’t as pronounced as one would expect from the market’s favorable reaction to retail sector results thus far. Please note that Retail sector stocks are up the most compared to any other sector in response to Q4 results.
With results from 68.9% of the sector’s market cap in the S&P 500 index already out, total Retail sector earnings are up +2.2% on +5.6% higher revenues, with 69.6% beating consensus EPS estimates and 47.8% beating top-line estimates.
Except for the lower ratio of retailers beating revenue estimates, the earnings and revenue growth rates and the earnings beat ratios are modestly better than what we have been seeing from the same group of retailers in other recent quarters.
The sector’s persistent margin woes (earnings growth is less than half the top-line gain), a function of the extremely promotional environment that all industry players have been complaining about. The issue will likely get even more pronounced with the Wal-Mart (WMT-Free Report) pay-hike announcement pressuring others like Target (TGT-Free Report) to follow suit.
Q4 Earnings Scorecard (as of February 19th, 2015)
Including this morning’s reports, we now have Q4 results from 428 S&P 500 members, with total earnings for these companies up +6.1% from the same period last year, with 68.9% beating earnings estimates. Total revenues are up +1.5%, with 55.4% beating top-line estimates.
Comparing the results thus far with what we have been seeing from the same group of companies in other recent quarters in terms of growth rates, beat ratios and guidance presents a mixed picture.
We have discussed the Apple (AAPL-Free Report) effect in this space before and the effect is very pronounced. Apple isn’t the only ‘unusual’ factor this earnings season. Results from the Finance sector, particularly tough comparisons at Citigroup (C-Free Report) and J.P. Morgan (JPM-Free Report), have been a drag on the aggregate growth picture as well. And then we have the whole oil situation, with profitability of the Energy sector companies following what has been happening to oil prices.
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