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4 Retail Stocks in the Spotlight This Earnings Season - Earnings ESP

Global issues - be it Ukraine tensions, economic mayhem in Europe or slowdown in China - seem to have the least impact on the U.S. economy as evident from the recent gross domestic product (GDP) data released by the Bureau of Economic Analysis. Real GDP (advance estimate) rose 2.3% for the second quarter of 2015 against revised growth of 0.6% reported in the first quarter.

The increase came on the back of higher consumer spending, rise in exports, state and local government expenditures and residential fixed investment. Consumer spending, which gained from lower oil prices and an improved job scenario, jumped 2.9% in the second quarter, following a 1.8% increase in the first quarter.

According to the recent data from the Bureau of Labor Statistics, the unemployment rate for June has declined to 5.3% from 5.5% in May and reached its lowest level since Sep 2008. On the other hand, the U.S Department of Labor reported that seasonally adjusted initial claims increased by 12,000 to 267,000 in the week ending Jul 25.

With a rebound in the economy coupled with improved consumer spending and job prospects, the retail-wholesale sector has to be in the spotlight. We have highlighted 4 Retail-Wholesale stocks that may stand out this earnings season:

4 Picks to Boost Your Portfolio

We have identified the stocks based on Zacks' Profitable Mix formula: Favorable Zacks Rank - Zacks Rank #1 (Strong Buy) or #2 (Buy) - and a positive Zacks Earnings ESP. Our research shows that for the stocks with this combination, the chance of a positive earnings surprise is as high as 70%. A favorable rank indicates positive estimate revisions by analysts who are optimistic about the future performance of companies. Moreover, Earnings ESP is our proprietary methodology for identifying stocks that have the best chance of surprising in their next earnings announcement.

DSW Inc. ( DSW ) is a Zacks Rank #2 stock having an earnings ESP of +2.38%. The current Zacks Consensus Estimate for second-quarter 2015 is 42 cents a share, portraying an improvement of 13% from the prior-year period. This Columbus, OH-based apparel retailer registered positive earnings surprise of 8.5% in the preceding quarter and has a long-term earnings growth rate of 15%. The company is scheduled to report its second-quarter results on Aug 25.

Red Robin Gourmet Burgers Inc. ( RRGB ) is a Zacks Rank #2 stock with an earnings ESP of +2.63%. The current Zacks Consensus Estimate for second-quarter 2015 is pegged at 76 cents a share, reflecting an increase of 12.2% year over year. This Greenwood Village, CO-based casual dining and fast-casual restaurant operator registered an average positive earnings surprise of 25% in the first quarter and has a long-term earnings growth rate of 11.3%. The company is slated to report its second-quarter results on Aug 11.

Darden Restaurants Inc. ( DRI ) is a Zacks Rank #2 stock with an earnings ESP of +5.36%. The current Zacks Consensus Estimate for first-quarter fiscal 2016 is pegged at 56 cents a share, reflecting an increase of 76.6% year over year. This Orlando, FL-based full-service restaurant operator posted an earnings surprise of 16.1% in the preceding quarter. Also, it has a long-term earnings growth rate of 12.4%. The company is expected to report its first-quarter results on Sep 11.

Dave & Buster's Entertainment Inc. ( PLAY ) is a Zacks Rank #1 stock with an earnings ESP of +4.55%. The current Zacks Consensus Estimate for second-quarter 2015 is pegged at 22 cents a share. This Dallas-TX based dining and entertainment provider registered an average positive earnings surprise of 24.3% in the first quarter and has a long-term earnings growth rate of 19.2%. The company is expected to report its second-quarter results on Sep 14.

Bottom Line

We believe that the above stocks with strong fundamentals and growth prospects are capable of meeting investors' expectations. Your portfolio's chance of giving you higher returns increases, if you have a favorably ranked stock powered by the optimism of an earnings beat in the to-be-reported quarter.

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DAVE&BUSTRS ENT (PLAY): Free Stock Analysis Report

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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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