Blue-Chip Retail Earnings on Deck: 3 Stocks to Keep an Eye On
Major retail players will be reporting first-quarter earnings numbers this week. The coronavirus outbreak has forced retailers selling discretionary items to shut outlets.
Meanwhile, retailers suppling essential commodities like food and cleaning products saw a considerable sales improvement in the quarter ending March.
What’s more, the results will provide a clear picture of how retailers have managed the unprecedented pressure on supply chains, particularly for essentials like cleaning supplies.
We will also gain an insight into the levels of cash flow and debt. After all, for any retailer, the ability to mitigate debt obligations is going to be crucial for survival.
Here we discuss three key retail earnings reports which could move markets –
Walmart
Retail behemoth, Walmart Inc. (WMT) is scheduled to report first-quarter earnings on May 19, before market open. Walmart’s management hasn’t said anything recently about the impact of the pandemic on its performance. But the company has hired almost 200,000 new employees in the first quarter, which certainly indicates a spike in consumer demand.
And since Walmart is currently the country’s biggest supplier of grocery products, its quite evident that grocery sales amid the crisis have ticked up, compelling the company to expand its workforce. Thus, the company’s overall revenues for the first quarter are expected at $130.89 billion, suggesting a 5.6% rise from a year ago.
But the company has faced considerable stress due to the pandemic that might have dented its profits. For instance, the company had to bear expenses like employee bonuses amid the lockdown in the first quarter. Similarly, the company had to shoulder additional costs related to supply chain requirement, which likely hampered its profit margins. Analysts, thus, expect Walmart’s earnings per share at $1.12 for the first quarter compared with $1.13 a year ago.
The Zacks Rank #3 (Hold) company has an Earnings ESP of -1.13%. Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Home Depot
Home Depot (HD) will report first-quarter fiscal 2020 results on May 19, before market open. The home improvement chain surely has faced a serious challenge as consumer spending declined in the quarter ending April 2020, thanks to the worst jobs market in history. Needless to say, the U.S. economy reported a record 20.537 million job losses in April.
To top it, pandemic-induced lockdowns forced the company to reduce operating hours during the vital spring promotional season and compelled the company to reduce hiring to fulfil social distancing norms at its stores. But as Americans are stuck at home, they are focused on spending on home improvement items. This showed in the modest improvement in March sales, per the Census Bureau.
At the same time, the company’s Pro segment gained in the said quarter from Home Depot’s efforts to simplify the Pro shopping experience. Hence, Home Depot expects revenues for the quarter at $27.31 billion, suggesting a 4.5% rise from the year-ago levels. The Zacks Rank #3 (Hold) company, by the way, has an Earnings ESP of +1.71%.
Target
Target (TGT) is scheduled to report earnings results for the quarter ending April 2020 on May 20, before market open. Unlike Walmart, Target caters to both low-end as well as high-end consumers. At the same time, it derives sales from a slew of categories, including groceries, household essentials, apparel and electronic items.
Despite the pandemic, Target saw a spike of food and beverages in March and somewhat remained steady in April. Apparel sales may have declined a bit but sales of home improvement items and electronic have gone up, particularly in April. In fact, digital sales climbed 275% in the first three weeks of April. Target, thus, expects total revenues of $18.85 billion, suggesting nearly 7% rise from year-ago levels.
However, Target had to bear additional costs such as employee wages and bonuses, and an increase in supply chain expenses that might have eaten into profits. Analysts expect the company’s earnings per share at 73 cents, indicating a decline from the year-ago levels of $1.53 a share. The Zacks Rank #4 (Sell) company has an Earnings ESP of -28.94%.
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Major retail players will be reporting first-quarter earnings numbers this week. The coronavirus outbreak has forced retailers selling discretionary items to shut outlets.
Meanwhile, retailers suppling essential commodities like food and cleaning products saw a considerable sales improvement in the quarter ending March.
What’s more, the results will provide a clear picture of how retailers have managed the unprecedented pressure on supply chains, particularly for essentials like cleaning supplies.
We will also gain an insight into the levels of cash flow and debt. After all, for any retailer, the ability to mitigate debt obligations is going to be crucial for survival.
Here we discuss three key retail earnings reports which could move markets –
Walmart
Retail behemoth, Walmart Inc. WMT is scheduled to report first-quarter earnings on May 19, before market open. Walmart’s management hasn’t said anything recently about the impact of the pandemic on its performance. But the company has hired almost 200,000 new employees in the first quarter, which certainly indicates a spike in consumer demand.
And since Walmart is currently the country’s biggest supplier of grocery products, its quite evident that grocery sales amid the crisis have ticked up, compelling the company to expand its workforce. Thus, the company’s overall revenues for the first quarter are expected at $130.89 billion, suggesting a 5.6% rise from a year ago.
But the company has faced considerable stress due to the pandemic that might have dented its profits. For instance, the company had to bear expenses like employee bonuses amid the lockdown in the first quarter. Similarly, the company had to shoulder additional costs related to supply chain requirement, which likely hampered its profit margins. Analysts, thus, expect Walmart’s earnings per share at $1.12 for the first quarter compared with $1.13 a year ago.
The Zacks Rank #3 (Hold) company has an Earnings ESP of -1.13%. Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Home Depot
Home Depot HD will report first-quarter fiscal 2020 results on May 19, before market open. The home improvement chain surely has faced a serious challenge as consumer spending declined in the quarter ending April 2020, thanks to the worst jobs market in history. Needless to say, the U.S. economy reported a record 20.537 million job losses in April.
To top it, pandemic-induced lockdowns forced the company to reduce operating hours during the vital spring promotional season and compelled the company to reduce hiring to fulfil social distancing norms at its stores. But as Americans are stuck at home, they are focused on spending on home improvement items. This showed in the modest improvement in March sales, per the Census Bureau.
At the same time, the company’s Pro segment gained in the said quarter from Home Depot’s efforts to simplify the Pro shopping experience. Hence, Home Depot expects revenues for the quarter at $27.31 billion, suggesting a 4.5% rise from the year-ago levels. The Zacks Rank #3 (Hold) company, by the way, has an Earnings ESP of +1.71%.
Target
Target TGT is scheduled to report earnings results for the quarter ending April 2020 on May 20, before market open. Unlike Walmart, Target caters to both low-end as well as high-end consumers. At the same time, it derives sales from a slew of categories, including groceries, household essentials, apparel and electronic items.
Despite the pandemic, Target saw a spike of food and beverages in March and somewhat remained steady in April. Apparel sales may have declined a bit but sales of home improvement items and electronic have gone up, particularly in April. In fact, digital sales climbed 275% in the first three weeks of April. Target, thus, expects total revenues of $18.85 billion, suggesting nearly 7% rise from year-ago levels.
However, Target had to bear additional costs such as employee wages and bonuses, and an increase in supply chain expenses that might have eaten into profits. Analysts expect the company’s earnings per share at 73 cents, indicating a decline from the year-ago levels of $1.53 a share. The Zacks Rank #4 (Sell) company has an Earnings ESP of -28.94%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>
Click to get this free report Target Corporation (TGT) : Free Stock Analysis Report The Home Depot, Inc. (HD) : Free Stock Analysis Report Walmart Inc. (WMT) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research
