The third-quarter 2019 earnings season is approaching its end. Retail is the only major sector in which several big corporates are yet to declare results. Despite several microeconomic, macroeconomic and geopolitical headwinds, third-quarter earnings results were not as weak as expected in the beginning of the reporting cycle. However, overall earnings are still expected to dip.
Better-Than-Expected Third-Quarter Earnings So Far
As of Nov 15, 462 S&P 500 members reported third-quarter results. Total earnings for these index members decreased 1.4% from the same period last year while revenues increased 4.4%. Notably, 72.7% companies surpassed EPS estimates and 57.8% beat on revenues.
At present, total third-quarter earnings for the S&P 500 Index are expected to be down 1.8% from the prior-year period while revenues are expected to increase 4.2%. This indicates improvement from an earnings decline of 5% on 4.2% higher revenues, expected initially. (Read More: What Ails Macy's and the Other Department Store Stocks?)
Retail Sales in Q3
Overall retail sales in the third quarter of 2019 were mixed. In the first two months of the period, retail sales grew 0.8% and 0.6%, respectively. However, in September, retail sales declined 0.3%. In fact, a decline was noted for the first time since February.
Core retail sales in September (excluding automobiles, gasoline, building materials and food service) decreased 0.1% compared with a gain of 0.2% in August. However, year over year, retail sales increased 4.1% in September.
Meanwhile, U.S. consumer spending remained firm and is driving the country's GDP. In the third quarter of 2019, the U.S. economy grew 1.9%, surpassing the consensus estimate of 1.6%, primarily buoyed by a 2.9% increase in consumer spending. Household spending rose a seasonally adjusted 0.2% in September from August.
4 Retailers Set to Beat on Earnings
Below are four stocks set to beat earnings estimates this week. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. Each of our picks carries either a Zacks Rank # 2 or 3 and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows price performance of our four picks in the past three months.
Urban Outfitters Inc. URBN is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gifts products. It operates in two segments, Retail and wholesale. The Zacks Rank #2 company has an Earnings ESP of +2.93% for the third quarter of fiscal 2020 (ended October 2019).
The Zacks Consensus Estimate for the current quarter and year improved 1.8% and 0.4%, respectively, over the last 30 days. The company delivered positive earnings surprise in the last four quarters, with an average beat of 10.5%. Urban Outfitters is expected to release earnings results on Nov 19, after the closing bell.
Lowe's Companies Inc. LOW operates as a home improvement retailer in the United States, Canada and Mexico. The company offers a line of products for construction, maintenance, repair, remodeling and decorating. The Zacks Rank #3 company has an Earnings ESP of +1.68% for the third quarter of fiscal 2019 (ended October 2019).
Lowe's has an expected earnings growth rate of 28.9% and 10.3% for the current quarter and year, respectively. The company delivered positive earnings surprise in three out of the last four quarters, with an average beat of 1.6%. Lowe's is expected to release earnings results on Nov 20, before the opening bell.
Ross Stores Inc. ROST operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brands. Its stores primarily offer apparel, accessories, footwear and home fashions. The Zacks Rank #2 company has an Earnings ESP of +2.39% for the third quarter of fiscal 2019 (ended October 2019).
Ross Stores has an expected earnings growth rate of 6.6% and 5.6% for the current quarter and year, respectively. The company delivered positive earnings surprise in the last four quarters, with an average beat of 2.5%. Ross Stores is expected to release earnings results on Nov 21, after the closing bell.
Foot Locker Inc. FL is a retailer of athletic shoes and apparel. The company operates in two segments, North America and International. The Zacks Rank #3 company has an Earnings ESP of +0.29% for the third quarter of fiscal 2019 (ended Nov 2).
Foot Locker has an expected earnings growth rate of 12.6% and 4.7% for the current quarter and year, respectively. The company delivered positive earnings surprise in three of the last four quarters, with an average beat of 2.6%. Ross Stores is expected to release earnings results on Nov 22, before the opening bell.
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Lowe's Companies, Inc. (LOW): Free Stock Analysis Report
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