5 Stocks To Watch: HD, DKS, TJX, WMT, GPS
Estimize | Aug 15, 2016 09:29AM ET
Home Depot (NYSE:HD)
Consumer Discretionary - Specialty Retail | Reports August 16, before the open.
The Estimize consensus is looking for earnings of $1.98 per share on $26.49 billion in revenue, 1 cent higher than Wall Street on the bottom line and $17 million higher on the top. Compared to a year earlier, earnings are expected to increase by 15% with revenue increasing 7%. Investors should expect to see a small pop after the company reports. Typically the stock increases 2% immediately following a report. Shares of Home Depot are currently up 17% in the past 12 months, but haven’t fared as well in 2016.
What to Watch: Home Depot has outperformed the Estimize consensus in each of the last 3 quarters. That streak extends to 8 consecutive quarters when compared to Wall Street’s expectations. The broader recovery in the housing market and focus on improving customer experience have been key to Home Depot’s recent streak. With new and existing home sales making further strides, don’t expect earnings to falter in the upcoming report.
Low interest rates can be largely credited with the broader housing recovery since the financial crisis. As home sales steadily improve that will continue to drive traffic trends. Not only does Home Depot benefit from an increase in new home sales, but as home prices stay high, consumers tend to invest heavily into their properties. Strong job growth has also supported this ongoing trend, allowing consumers to spend on home improvement projects.
Home Depot is also putting forward strategic initiatives to drive sales. In response to the evolving retail environment, Home Depot is diligently devoting resources to its ecommerce platform. Last quarter online sales growth topped 21%, consistent with the double digit gains in previous quarters. A majority of online sales are typically picked up in stores which promote in-store sales.
Dick’s Sporting Goods Inc. (NYSE:DKS)
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Consumer Discretionary - Specialty Retail | Reports August 16, before the open.
The Estimize consensus is looking for earnings per share of 69 cents, down 10% from the same period last year. That estimate has dropped 11% since DKS most recent report in May. Revenue is anticipated to grow by 4% to $1.89 billion, a marked slowdown from past quarters. Fortunately, weak earnings haven’t held back the stock which just recently reached its 52 week high. The stock is up 7% in the past 12 months, but typically don’t move following a quarterly report.
What to Watch: Dick’s has been trending down the past couple of quarters, dragged lower by slowing sales and negative bottom line growth. Based on analyst’s estimates, Dicks appears to be headed for another weak quarter. However, the ongoing bounce back in the retail sector, Sports Authority bankruptcy, and strong quarter from competitor Big 5 Sporting Goods, could be a strong indicator of a surprise.
Dick’s has been hit hardest from the continual transition towards athleisure trends and ecommerce. Many of the retailer’s initiatives have been to solve these ongoing troubles, including expanding its e-commerce network and putting forward new marketing and merchandising efforts. Dick’s is also planning to open 100s of new stores in order to return to profitability and sales growth. Sports Authority’s bankcruptcy this year should provide Dick’s with a fresh influx of customers.
Earnings prospects are still low despite continued efforts to jumpstart growth. Management lowered its fiscal 2016 and second quarter guidance after a bleak first quarter. For the second quarter, management expects earnings per share in the range of $0.62 - $0.72 cents. Same store sales are projected in the range of -4% to -1% after growing 0.5% last quarter.
The TJX Companies (NYSE:TJX)
Consumer Discretionary - Specialty Retail | Reports August 16, before the open.
The Estimize consensus is looking for earnings per share of 83 cents, 4% higher than the same period a year earlier. That estimate hasn’t moved since TJX’s most recent report in May. Revenue is anticipated to jump 7% to 7.91 billion, a marginal slowdown from previous quarters. The market typically react well to the company’s report. Shares, on average, increase 1 % immediately following a report, reaching 2% gains in the 30 days following.
What to Watch: TJX is probably best known as the parent company of TJ Maxx, Marshalls (LON:MSLH), HomeGoods and now Sierra Trade Post. The recent acquisition of the Australian based company will be used to expand its global presence and boost revenue. Generally speaking, TJX companies have been performing modestly lately. Quarterly results have topped expectations for 4 consecutive quarters, driven by value-focused consumers. With better-than-expected results from Macy’s, Kohl’s, and JCPenney last week, it would appear TJX is well on its way to another strong report.
TJX has been largely resilient through rising popularity of online retailers. They’ve seen modest growth the past few quarters driven by improving traffic trends, solid comparable store sales growth and higher margins. Increased marketing and promotional initiatives can be credited with this recent uptake. The acquisition of Sierra Trade Post adds a new layer of revenue and a means to widen its worldwide footprint.
Based on previous guidance, second quarter earnings are expected in the range of 77 cents to 79 cents. Clearly the Estimize community is bullish that the company will eclipse that mark by a fairly wide margin. Revenue targets are also well above guidance from the prior quarter.
Wal-Mart (NYSE:WMT)
Consumer Staples - Food & Staples Retailing | Reports August 18, before the open.
The Estimize consensus is looking for earnings per share of $1.04 on $120.39 billion in revenue, 2 cents above Wall Street on the bottom line and $305 million higher on the top. Compared to a year earlier this reflects a 4% decrease in earnings and flat sales. Earnings estimates have increased 3% since the last quarterly report, with sales estimates unchanged.
What to watch: Negative year-over-year profit growth for the last 5 consecutive quarters has been mostly driven by increased labor costs and the impact of the stronger dollar. Revenues that turned negative in the last two quarters of Wal-Mart’s fiscal 2016 also suggest stiff competition from Amazon (NASDAQ:AMZN) is at play here as well. Despite the downturns on the top and bottom-line, same store sales have actually come in positive for the last 7 quarters. For the quarter reporting this Thursday, the world’s largest retailer is guiding for US same store sales growth in the range of 1% - 3%.
As improvements to its online platform have contributed to overall company sales, it’s clear that Wal-Mart is doubling down on ecommerce space. Just two weeks ago the company purchased online retailer, jet.com, for $3 billion, in an effort to directly taking on the currently reigning Amazon. WMT also sold it’s Chinese e-commerce business, Yihaodian, to Chinese online retailer JD.com in order to expand its international e-commerce presence.
Year-to-date the stock is up a whopping 21%, but historically stays flat after an earnings report.
Gap Inc. (NYSE:GPS)
Consumer Discretionary - Specialty Retail | Reports August 18, after the close.
The Estimize consensus calls for EPS of $0.55, 3 cents higher than Wall Street’s consensus. Revenue expectations are in-line at $3.8 billion. Earnings expectations have trended upward by 11% since last quarter, while revenue estimates are up 1%. This puts YoY growth expectations at -19% for EPS and -3% for sales.
What to Watch: We got our first peek at what to expect from Gap’s Q2 results when they released same-store sales results on August 8. Gap comp store sales for the second quarter were down 2% versus the prior year, with negative results from both the company’s namesake stores and Banana Republic, and Old Navy turning up flat. Slowing traffic and currency headwinds continue to be the culprits of dismal results.
For the second quarter, Gap is guiding for EPS in the range of $0.58 - $0.59, higher than what the Estimize community is currently expecting. The company believes progress in streamlining initiatives and improvements to larger brands will contribute to the bottom-line. In particular, efforts to improve their off-price brand, Old Navy, seem to be working thus far.
In a world where fast fashion is stealing market share from traditional retailers, Gap needs to revise its product portfolio in a way that is appealing to customers, something they have struggled with in the past. In a sign of the times, Gap has been closing a large number its stores around the world: 175 North American store closures were announced in 2015, while 53 Old Navy store closures in Japan and 20 international Banana Republic store closures were announced this year . Many analysts are still calling for more store closures to make the chain competitive once again.
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