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3 Retail Stocks (BBY, RL, URBN) to Buy Ahead of Quarterly Earnings

Benjamin Rains
Strong domestic economy and the Trump government's tax codes helped small-cap business optimism index hit to its highest level in May since 1983

It has been a busy week for retailers, with industry giants from Macy’s M to Nordstrom JWN all reporting their first quarter earnings results. But Q1 hasn’t treated all of these companies the same, so let’s take a look at a few more big-name retailers that investors might want to consider buying ahead of earnings next week.

Shares of Macy’s surged over 11% on Wednesday after the company topped both top and bottom line estimates, and raised its full-year earnings guidance. Meanwhile, fellow department store power Nordstrom did not perform as well and saw its stock price sink nearly 10% through morning trading on Friday after its comps climbed only 0.6%.

With that said, there are clearly still gains to be had from retail stocks even as worries about Amazon (AMZN) and other online sellers mount. Investors just need to look in the right places and search for stocks that are expected to top quarterly earnings estimates.

Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise, in one way or the other. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Today, we are giving our readers a free look at three of these strong stocks ahead of their upcoming quarterly earnings reports. Check them out now:

1.      Best Buy BBY

Shares of Best Buy are up 55% over the last year and have also climbed 7.4% in the last four weeks. The big-box electronics retailer is expected to see its Q1 revenues pop by 2.8% to hit $8.77 billion, based on our Zacks Consensus Estimates. Meanwhile, Best Buy’s earnings are projected to surge by 25% to touch $0.75 per share.

Best Buy’s Most Accurate Estimate—the representation of the most recent analyst sentiment—calls for quarterly earnings of $0.76 per share, which is 1 cent better than our current consensus estimate. The company is also currently a Zacks Rank #2 (Buy) and sports an Earnings ESP of 2.01%. Therefore, investors can consider BBY as a stock that could top quarterly earnings estimates when it reports its Q1 financial results before the market opens on Thursday, May 24.

2.       Ralph Lauren RL

Moving on, Ralph Lauren is another famous name in retail that has outperformed the S&P 500 by a wide margin. The stock has soared 59% over the last year and has also climbed 5.6% over the last 12 weeks. Ralph Lauren’s quarterly revenues are expected to dip by 4.7% to hit $1.49 billion. At the other end of the income statement, RL is also projected to experience a decline from the prior-year period.

Our current estimates are calling for Ralph Lauren’s quarterly earnings to slip by 3.4% to hit $0.86 per share. However, the company is currently a Zacks Rank #2 (Buy) and rocks an earnings ESP of 2.92%, mostly because its bottom line estimates have climbed recently. RL’s Most Accurate Estimate comes in at $0.88 per share, which is 2 cents above our current consensus estimate. This means that the upscale fashion giant could impress investors with a bottom line beat that might send its stock up, at least in the near-term. Ralph Lauren is set to report its quarterly results before the opening bell on Wednesday, May 23.

3.       Urban Outfitters URBN

Urban Outfitters has seen its stock price skyrocket 120% over the last year and 20% during the last 12 weeks. The trendy fashion retailer’s quarterly revenues are projected to climb by nearly 10% to touch $837.08 million. Investors should also be excited to see that Urban Outfitters’ earnings are expected to hit $0.30 per share, which would mark a 130.7% surge from the prior-year quarter. 

URBN is also currently a Zacks Rank #2 (Buy), with an Earnings ESP of 2.52%. URBN’s Most Accurate Estimate is also coming in 1 cent better than our current consensus estimate. This, of course, means that Urban Outfitters could top earnings estimates when it reports its Q1 financial results after market close on Tuesday, May 22.

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Nordstrom, Inc. (JWN) : Free Stock Analysis Report
 
Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
 
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
 
Macy's, Inc. (M) : Free Stock Analysis Report
 
Ralph Lauren Corporation (RL) : Free Stock Analysis Report
 
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