More Retail Earnings To Come, Not Much Room For Surprises

 | May 18, 2014 12:53AM ET

With Q1 results from only 34 S&P 500 members still awaited at this stage, the earnings season is effectively now behind us. The Retail sector is the only one that has a significant number of reports still awaited; 16 of the remaining 34 companies are retailers. But even for the Retail sector, we have seen Q1 results from 74.8% of the sector’s total market capitalization already, with not that much room for major surprises.  

We will get Q1 results from 117 companies this week, including 23 S&P 500 members. This week’s line-up of retailers include Home Depot (HD)), Lowe’s (LOW), Best Buy (BBY), Target (TGT)) and others. Beyond, we have a few bellwether operators from other sectors coming out with results this week as well, like Hewlett-Packard (HPQ) and Salesforce.com (CRM).

Target has had its share of operational issues lately, so its report wouldn’t likely tell us much beyond what we saw already from Wal-Mart’s (WMT) underwhelming report. The home-improvement retailers will be interesting; not so much their actual Q1 reports, but their commentary about the state of the housing sector. There is growing concern that the housing market has lost some of its recent momentum and that the sector’s Q1 weakness may have been more than just weather related.

Strong results from a couple of retailers notwithstanding, it has been a tough environment for the sector. Total earnings for the 27 retailers in the S&P 500 that have reported results already (out of a total of 43) are up +0.9% on +3.6% higher revenues, with a very low 40.7% of them beating earnings estimates and a respectable 44.4% coming ahead of top-line expectations.  Combining the Retail sector earnings for the 27 companies that have come out with the 16 still to come, the sector’s total earnings in Q1 should be flat (0.0%) on +3.9% higher revenues and lower margins. Same-store sales improved markedly in April, with pent up demand following Q1’s harsh weather and the Easter shift benefiting the numbers.

The broad trends about the Q1 earnings are fairly well established by now and the coming reports are unlikely to change them in any material way. These trends pertain to anemic growth, fewer top-line surprises and continued negative guidance that is prompting estimates for the current period to come down.

Scorecard for 2014 Q1 (as of Friday, May 16th)

Total earnings for the 466 S&P 500 members that have reported results are up 1.4% from the same period last year, with a ‘beat ratio’ of 69.1% and a median surprise of +4.1%. Total revenues are up +0.9%, with a revenue ‘beat ratio’ of 52.1% and the median company beating top-line expectations by 0.2%.

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The table below shows the current scorecard for all 16 Zacks sectors. As you can see, the earnings season has come to an end for 10 of the 16 Zacks sectors, with results from just 5% of the index’s total market capitalization still awaited.