For Immediate Release
Chicago, IL - August 20, 2018 - Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Wal-Mart WMT , Macy's M , Kohl's KSS , Target TGT and Amazon AMZN .
To see more earnings analysis, visit https://at.zacks.com/?id=3207 .
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Strong Retail Sector Earnings Performance
Wal-Mart shares struggled this year, with the retail giant's February 19 th earnings release raising doubts about its online business as well as overall margins. The stock lost more than 10% of its value following the February earnings report, with the subsequent May 17 th release doing little to ease those worries.
Those clouds appear to have finally lifted after this quarterly report, where the retailer seems to be checking all the appropriate boxes, from a ramp-up in online sales to comp growth and even market share gains. This is helping the stock finally enjoy some sunshine.
Wal-Mart is hardly alone in enjoying the market's affections after coming out with better-than-expected results. The overall tone of Retail sector results in recent days has been positive, notwithstanding a few standout disappointments like Macy's . We have a number of major retailers like Kohl's , Target and others coming out with Q2 results the week of the 20th, but the sector's results thus far have been very good.
We now have Q2 results from 24 of the 38 retailers in the S&P 500 index that, combined, account for 85.1% of the sector's total market cap in the index. Total earnings for these Retail sector companies that have reported results are up 34.9% from the same period last year on +9.7% higher revenues, with 91.7% beating EPS estimates and 75% beating revenue estimates.
This is better performance than we have seen from these same retailers in other recent periods. Please note that the sector's Q2 performance compares favorably to historical periods even after we exclude Amazon's impressive results.
Q2 Earnings Season Scorecard (as of August 17 th , 2018)
We now have Q2 results from 467 S&P 500 members, or 93.4% of the index's total market membership. Total earnings for these 467 companies are up 25.5% from the same period last year on +9.9% higher revenues, with 79.2% of the companies beating EPS estimates and 72.8% surpassing revenue estimates.
With another 17 index members on the docket to report quarterly results this week, we will have seen Q2 results from 484 S&P 500 members by the end of this week.
As you can see, the earnings and revenue growth pace is above the other comparable periods in the left-hand chart. The 79.2% proportion of these companies beating EPS estimates is above what we had seen from the same group of companies in other periods while the proportion of revenue beats is below the preceding period but above the historical level.
For the quarter as a whole, total Q2 earnings for the index are expected to be up 24.9% from the same period last year on +9.7% higher revenues. This exceeds the 2018 Q1's +24.6% earnings growth, which was the highest quarterly growth pace since 2010.
The Q2 earnings growth pace likely represents peak growth in this cycle, with the growth pace expected to decelerate in the coming quarters. This is the case with revenues as well.
The Revisions Trend
The revisions trend has been the only area of somewhat weakness in an otherwise very strong corporate earnings picture. Estimates for the current period (2018 Q3) have modestly come down since the quarter got underway, in contrast to what we had been seeing in the comparable periods in the preceding three reporting cycles.
Given the ongoing emerging market worries in the wake of the Turkey situation, strength in the U.S. dollar and global trade uncertainty, this negative revisions trend is likely a sign of things to come going forward. We don't want to come across as overly alarmist on the revisions front, but it is nevertheless a negative development in an otherwise very strong Q2 reporting cycle.
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