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3 Retail Stocks Warranting Attention This Earnings Season

Ambiguity over the timing of a rate hike, concerns about the health of the Chinese economy and slowdown in the global markets have been the major questions looming over the investment space lately. Though the Federal Reserve may opt for a rate hike in December, which is currently near-zero level, the China mystery will likely take longer to unfold.

Concerns surrounding China's economic tumult, fettered with heavy equity market losses, have triggered worldwide sell-offs. China disappointed markets following drop in profits of the Chinese industrial companies, lower-than-expected investment and factory output.

Moreover, sluggish manufacturing data, significant trade gap and decline in foreign exchange reserves raised concerns. Asian Development Bank's (ADB) weak economic outlook for China also dented investor sentiment.

With financial markets across the globe pressing the panic button, U.S. equities have come under tremendous pressure. The Dow, S&P 500 and Nasdaq slumped 1.5%, 2.6% and 3.4%, respectively, in September while, dropping 7.6%, 7% and 7.4%, respectively, in the third quarter. The loss of momentum in the euro-zone has further welled up global woes.

Nonetheless, the U.S. economy is showing relative signs of strength amid the potentially alarming global backdrop, as indicated by some domestic data released recently. According to the Bureau of Economic Analysis' third and final estimate, the U.S. economy registered growth of 3.9% in the second quarter, higher than the second and first estimate of 3.7% and 2.3%, respectively.

On the other hand, a modestly positive labor market read from ADP, the payroll processor, gives further indication that the U.S. economy is improving. Private companies added 200,000 new jobs in September, higher than the estimates of 190,000 and prior month's revised figure of 186,000.

Consumer Confidence, which determines the health of the economy, touched its highest level since January. According to the recent Conference Board data, the Consumer Confidence Index increased to 103 in September from the August reading of 101.3. Additionally, Consumer spending, which accounts for over two-thirds of the U.S. economic activity, inched up 3.6% in the second quarter from the previous estimate of 3.1% and also gained 0.4% in the month of August.

There is no doubt that the cloud of obscurity is still looming over the global economy and to fetch higher returns amid such an investment climate is a Herculean task. However, we have identified three stocks which not only have strong fundamentals but we also expect them to report solid quarterly numbers.

Moreover, the holiday season is around the corner and with improving consumer spending and confidence retailers looks optimistic. So it's better to grab these retail stocks now before they start touching new highs after their results.

3 Prominent Choices

You may bet on eBay Inc.EBAY , which facilitates commerce and payments on behalf of users, merchants and retailers. The stock carries a Zacks Rank #2 (Buy) and has an Earnings ESP of +3.13%. The current Zacks Consensus Estimate for the third quarter of 2015 stands at 32 cents a share. The San Jose, CA-based company delivered an average positive earnings beat of 7.8% over the trailing four quarters and has a long-term earnings growth rate of 7%. The company is slated to report results on Oct 21.

Investors can count on Walgreens Boots Alliance, Inc.WBA , the operator of a network of drugstores. The stock holds a Zacks Rank #2 and has an Earnings ESP of +6.17%. The current Zacks Consensus Estimate for the fourth quarter of fiscal 2015 stands at 81 cents a share, reflecting a growth rate of 9.4% year over year.

This Deerfield, IL -based company registered an average positive earnings surprise of 13.1% over the trailing four quarters, and has a long-term earnings growth rate of 11.9%. The company is expected to report results on Oct 28.

We also suggest investing in the nation's leading grocery retailers, The Kroger Co.KR . The stock sports a Zacks Rank #2 and has an Earnings ESP of +2.63%. The current Zacks Consensus Estimate for the third quarter of fiscal 2015 stands at 38 cents a share, portraying roughly 11.5% growth from the prior-year quarter.

Based in Cincinnati, OH, Kroger delivered an average positive earnings surprise of 9.6% over the trailing four quarters, and has a long-term earnings growth rate of 9.9%. The company is expected to report results on Dec 3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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