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3 Retail Stocks to Buy Right Now for Value & Income

Benjamin Rains
We have highlighted three retail stocks that present impressive value, pay a dividend, and earn a Zacks Rank 2 (Buy) or better at the moment.

The S&P 500 has climbed nearly 15% this year, driven by growth from tech giants. With that said, no matter how long the current rally lasts, it is always a good idea to search for stocks that provide great value and solid income.

Therefore, we have highlighted three retail stocks that present impressive value, pay a dividend, and earn a Zacks Rank #2 (Buy) or better at the moment.

1. Target TGT

Target’s full-year 2018 comparable sales were their strongest since 2005, up 5%. Plus, Target’s digital comps surged 36% to help extend a run of five straight years of at least 25% growth in the increasingly important retail category. Target, like rivals Walmart WMT, Costco, and Kroger KR, has ramped up its e-commerce business in order to better compete in a modern retail age. The Minneapolis-based retailer has introduced same-day delivery at many locations, redesigned stores, opened smaller locations in college towns and urban areas, and much more.

Looking ahead, our current Zacks Consensus Estimates call for Target’s adjusted first-quarter 2019 earnings to pop 8.3% on the back of 4.5% revenue growth. For the full-year, the Minneapolis-based retailer is expected to see its EPS figure jump 7.4% on 3.4% revenue expansion. The company has also seen a ton of positive earnings estimate revision activity for 2019 and 2020 to help Target earn a Zacks Rank #2 (Buy).

Target is a dividend payer that recently announced a $0.64 a share payout, for an annualized dividend of $2.56 and an impressive 3.23% yield. TGT stock is also trading at 13.5X forward 12-month Zacks Consensus. This marks a discount to the S&P 500’s 17X, its industry’s 25.7X average, and its own five-year high of 20.1X and 14.3X median. Plus, Target sports a P/S ratio of 0.54, which comes in below its industry’s 0.65 average. Target currently rocks “A” grades for Value and Growth in our Style Scores system and its stock price rests around 10% below its 52-week high, despite its 25% surge to start the year.  

2. Best Buy BBY 

Shares of Best Buy have soared over 40% in 2019 to double its industry’s average climb and crush the S&P. Some of BBY’s recent strength comes from a better-than-expected fourth quarter of its fiscal 2019, sparked by sales of headphones, accessories, and more. Meanwhile, the company’s full-year comps, including its website, climbed 4.8%. Last year was the electronics retailer’s fifth consecutive year of comps growth amid worries that e-commerce companies would undercut Best Buy.

The fellow Minnesota headquartered firm has rolled out more services, increased in-store pick for digital orders, introduced more price-matching, among other initiatives. The company’s appliances and electronics sales have also benefitted from once-mighty competitors like Sears closing so many stores. Best Buy’s fiscal 2020 earnings are projected to jump 5.8% to reach $5.63 per share. Peeking further ahead, the company’s full-year 2021 EPS figure is expected to jump 6.4% above our current year estimate.

BBY stock closed regular trading Thursday up 2.80% to $74.57 per share, which still gives the stock room to run before hitting its 52-week high of $84.37 per share. Best Buy’s price/sales ratio of 0.45 falls below its industry’s 0.74 as well as it peer Aaron's, Inc. AAN 0.93. The company is also trading just under its five-year median forward P/E at 12.7, which comes in well below its 18.2X high over this stretch. Best Buy is currently a Zack Ranks #2 (Buy) that pays an annualized dividend of $2.00 per share, with a yield of 2.76%.

3. Costco COST

The big-box grocery giant is coming off a better-than-expected Q2 fiscal 2019. COST stock has also jumped 20% to start the year. Costco’s e-commerce strength has helped drive growth. In fact, digital comps surged over 25% last quarter, boosted by Costco’s free two-day delivery for non-perishable food and household supplies, along with expanded same-day through its Instacart partnership.

Costco also recently proved its e-commerce strength as rivals such as Walmart and Target all roll out more digital offerings and delivery. On top of that, COST overtook Amazon’s AMZN spot as the number one internet retailer in terms of customer satisfaction in 2018, according to the American Customer Satisfaction Index. Looking ahead, Costco’s quarterly revenue is projected to jump 7.3% to reach $34.69 billion to match last quarter’s top-line expansion. Meanwhile, COST’s full-year revenues are projected to jump 7.6%, with its adjusted fiscal 2019 earnings expected to surge 15.8%.

Costco’s earnings estimate revision activity has also trended heavily in the right direction over the last 30 days, especially for 2019 and 2020. This positivity helps COST earn a Zacks Rank #2 (Buy). The company also pays an annualized dividend of $2.28, with a 0.94% yield. And Costco boasts “B” grades for Value, Growth, and Momentum and sports a 0.72 P/S ratio. Costco is also trading just a bit above its industry’s average forward P/E at 29.6.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Aaron's, Inc. (AAN) : Free Stock Analysis Report
 
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
Walmart Inc. (WMT) : Free Stock Analysis Report
 
Costco Wholesale Corporation (COST) : Free Stock Analysis Report
 
The Kroger Co. (KR) : Free Stock Analysis Report
 
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