The earnings season is underway and most companies in the Retail-Wholesale sector are yet to show their cards. Per the latest Zacks Earnings Outlook, the Retail-Wholesale sector is anticipated to witness top-line growth of 8.4% this reporting cycle, whereas the bottom line is expected to drop 0.5%. The earnings season has witnessed releases from 18.4% of the retail companies in the S&P 500 cohort.
The sector displays strength this reporting period, thanks to impressive growth strategies undertaken by the companies constituting the sector. Also, a strong jobs market (highlighted by the 50-year low unemployment rate of 3.5% in September) is likely to have aided consumers’ buying capacity, which is a key driver for the consumer-driven retail space.
Well, companies in the retail sector are likely to have gained from their constant omnichannel initiatives, brand introduction, store expansion and remodeling, and efforts to enhance delivery services in the quarter. Additionally, companies’ efficient pricing actions along with marketing and loyalty programs are likely to have worked in favor. These endeavors have helped retailers keep pace with the evolving consumer environment and counter hurdles related to sluggish brick-and-mortar traffic.
However, costs associated with such efforts, combined with any SG&A deleverage, rising operating expenses and escalated labor costs might have weighed on the bottom line.
All said, let’s check out four retailers, which are likely to beat estimates this earnings season.
Our research shows that for stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP, the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
4 Prominent Picks
RH (NYSE:RH) is worth a bet with a Zacks Rank #1 and an Earnings ESP of +2.00%. The Zacks Consensus Estimate for third-quarter fiscal 2019 earnings is pegged at $2.21, suggesting growth of 27.7% from the prior-year quarter. This home furnishings retailer has outperformed the Zacks Consensus Estimate by an average of 20.2% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Home Depot, Inc. (HD): Free Stock Analysis Report
The Children's Place, Inc. (PLCE): Free Stock Analysis Report
Dollar General Corporation (DG): Free Stock Analysis Report
Restoration Hardware Holdings Inc. (RH): Free Stock Analysis Report
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