The Retail Sector's Mixed Q2 Showing

Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>

Here are the key points:

• With Q2 results from two-thirds of the Retail sector companies out at this stage, total earnings for the sector are up only +0.1% on +6.4% higher revenues, with 76.9% beating EPS estimates and a very strong 84.6% beating revenue estimates. This is a notably higher proportion of positive beats from the sector than has been the case historically.

• While the Retail sector has a sizable number of companies still to report Q2 results, the earnings season has come to an end for 10 of the 16 Zacks sectors, with results from only 38 S&P 500 index members still awaited at this stage. Total earnings for the 462 index members that have reported are up +10.7% from the same period last year on +5.8% higher revenues, with 74.5% beating EPS estimates and 68.3% beating revenue estimates.

• While growth is a bit on the lighter side relative to the preceding period for these 462 index members, the proportion of companies beating estimates, particularly revenue estimates, is notably tracking above other periods.

• For Q2 as a whole, combining the actual results with estimates for the still-to-come companies, total earnings are expected to be up +10.2% from the same period last year on +5.4% higher revenues. This would be the second quarter in a row of double-digit earnings growth performance for the S&P 500 index.

• The Q2 growth is broad-based and not concentrated in one or two sectors. The strongest growth is from the Energy, Transportation, Technology, Aerospace, Construction, Business Services, and Industrial Products sectors. Q2 earnings growth would fall to +8.5% on +4.8% higher revenues on an ex-Energy basis.

• Beyond Q2, total earnings for the S&P 500 index are currently expected to grow by +4% on +4.7% higher revenues in the September quarter and +8.7% on +5.6% higher revenues in Q4.

• Estimates for Q3 have come down, but they appear to be following the moderate revisions pace we saw ahead of the start of the Q2 earnings season. Estimates have fallen for 14 of the 16 Zacks sectors, with the Technology and Industrial Products sectors experiencing positive revisions.

• For full-year 2017, total earnings for the index are expected to be up +7.5% on +4.1% higher revenues, which would follow +0.8% earnings growth on +2.1% higher revenues in 2016. Index earnings are expected to be up +11.1% in 2018 and +8.9% in 2019.

Retail Sector Scorecard

The official Standard & Poor's industry classification places the retail space in the Consumer Discretionary sector, but Zacks has a stand-alone economic sector for the industry that enables us to have a more granular view of developments in this space. The Zacks Retail sector includes, besides the traditional department stores and other brick-and-mortar operators, the online vendors like Amazon ( AMZN ) Priceline ( PCLN ) and restaurant operators. Results from the online vendors and the restaurant operators are already behind us at this stage.

For the Q2 earnings season, we have now have results from 26 of the 40 retailers in the S&P 500 index. Total earnings for the 26 retailers that have reported already are up +0.1% from the same period last year on +6.4% higher revenues, with 76.9% beating EPS estimates and 84.6% beating revenue estimates.

The proportion of retailers beating both EPS and revenue estimates is a very high 73.1%, the second highest of all 16 Zacks sectors.

The side-by-side charts below compare the sector's results thus far with what we have seen from the same group of 26 retailers in other recent periods.

You can see in the comparison charts above why we called the sector's Q2 performance as 'mixed'. A big proportion of retailers are beating estimates, both EPS and revenue estimates, at rates that are significantly above what we have been seeing from the same group of 26 retailers, but the Q2 earnings growth rate represents a deceleration from the historical trend.

A big reason for the sector's weak earnings growth performance is Amazon's results, whose Q2 earnings were down -77% on a year-over-year basis even as revenues were up +24.8%. Had it not been for the Amazon drag, total Q2 earnings for the Retail sector would be up +5.4%, which would be an improvement over what we have been seeing from the ex-Amazon group in other recent periods, as you can see in the right-hand comparison chart below.

For the sector as a whole, combining the results that have come out with estimates for the still-to-come retailers, total earnings are on track to be modestly in negative territory (-0.4%) on +4.4% higher revenues. The chart below shows the sector's Q2 blended growth rate for earnings and revenues contrasted with actual results for the preceding four quarters and estimates for the coming four.

Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview . He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.

3 Top Picks to Ride the Hottest Tech Trend

Zacks just released a Special Report to guide you through a space that has already begun to transform our entire economy...

Last year, it was generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for those who make the right trades early. Download Report with 3 Top Tech Stocks >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Priceline Group Inc. (PCLN): Free Stock Analysis Report, Inc. (AMZN): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

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.

In This Story


Other Topics

US Markets

Latest Markets Videos


    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

    Learn More