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3 Stocks To Watch Ahead Of Next Week's Consumer Confidence Report

Scott Rubin

Retail stocks have had an up and down week thus far. Nonetheless at least three are worth watching this week.

Stocks in the sector fell sharply on Tuesday in the wake of disappointing results from a string of retailers, including Staples (NASDAQ: SPLS), Urban Outfitters (NASDAQ: URBN), and Dick's Sporting Goods (NYSE: DKS).

The sector bounced back on Thursday, however, on a strong Q1 report from Williams-Sonoma and the news that existing home sales rose for the first time this year in April.

Good Data

On a seasonally adjusted basis, the annual sales pace of existing homes was 4.65 million, up slightly from 4.59 million in March. Although this was slightly below consensus estimates, investors reacted with optimism, nonetheless.

Heading into the housing report, Benzinga recommended a list of stocks to keep an eye on. The two bullish side picks, Williams-Sonoma (NYSE: WSM) and Restoration Hardware (NYSE: RH) had huge days and will continue to be worth watching.

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Shares of Williams-Sonoma surged around 8 percent on Thursday to close at $68.93. Restoration Hardware jumped 5 percent to $65.74. The retail sector as a whole outperformed the wider market by a wide margin. The SPDR S&P Retail ETF (NYSE: XRT) climbed better than 1 percent versus a gain of 0.06 percent for the Dow and 0.24 percent for the S&P 500.

Data To Watch

The next catalyst for retail stocks will be next week's consumer confidence data, due out on Tuesday, May 27. Economists expect that the Conference Board's Consumer Confidence Index will rise from 82.3 in April to 83.0 in May.

In addition to this key report, more housing data will also be released next Tuesday, including the Case-Shiller 20-city home price index and the FHFA Housing Price Index. Economists are expecting that the Case-Shiller 20-city index will show that home prices rose 12 percent in March compared to last year.

Traders looking for catalyst-driven ideas may want to concentrate on retailers that are highly correlated to the housing market. In addition to the upcoming economic data and Thursday's existing home sales report, Williams-Sonoma's strong earnings may continue to drive these stocks higher in the near-term.

The Stocks To Watch

Here are three names that may be strong bets next week:

Kirkland's (NASDAQ: KIRK) - This small-cap home furnishing company has had a rough start to 2014. Nevertheless, a big rally in the name after its first-quarter earnings report on Thursday may be a sign that the shares have found a bottom.

The company reported Q1 EPS of $0.12 on sales of $108.3 million. This compared to Wall Street analysts' consensus estimates calling for EPS of $0.10 on sales of $105.90. The company also reiterated its fiscal 2014 guidance and authorized a $30 million stock buyback plan.

Kirkland shares soared 15 percent on the news during Thursday's trading session. Despite the rally, the stock is still down better than 19 percent in 2014. Looking ahead, however, there are a number of potentially bullish catalysts in the coming week that may spur continued buying.

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Mattress Firm (NASDAQ: MFRM) - In March, Tempur-Pedic closed on its acquisition of Sealy Corporation to form Tempur Sealy International (NYSE: TPX). In the wake of this deal, there are now only three publicly-traded mattress companies of any significance -- Tempur Sealy, Select Comfort (NASDAQ: SCSS), maker of the Sleep Number bed, and Mattress Firm.

Mattress Firm has been a solid investment in recent years and any good news next week regarding the housing market and consumer confidence will likely boost the stock over the near-term.

At current levels, the shares trade at a forward P/E of 19 and a PEG ratio of 0.96. Wall Street analysts have a one-year price target for the stock of $50.00, which compares to its current price of roughly $44.00. In addition to upcoming catalysts, the strong report from Williams-Sonoma also appears to bode well for Mattress Firm's business.

Lowe's (NYSE: LOW) - The home improvement giant should benefit from any improvements in the housing sector as well as an uptick in consumer confidence.

The stock rose better than 3 percent on Thursday after the company updated its fiscal 2015 financial guidance. Lowe's said that it expects earnings per share of $2.63 on sales of $56.09 billion. This is ahead of current consensus estimates calling for EPS of $2.62 on sales of $56.08 billion in fiscal 2015.

On Wednesday, Lowe's also released its Q1 earnings results. For the first-quarter, the company reported EPS of $0.61, which beat Wall Street consensus estimates by a penny. Sales were $13.40 billion versus analysts' expectations of $13.86 billion. In light of the company's updated guidance and the rally in the stock on Thursday, this will be a name to watch next week.

Rival Home Depot is another name that was active this week and could see additional gains next week. Despite missing Wall Street earnings expectations on Tuesday, the stock has jumped in recent days, notching a gain of better than 3 percent since last Friday.

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