Quarterly updates from several of the country's top retailers will highlight this week's earnings calendar. Among the names set to report are mega-retailer Walmart (WMT, $130.52), home improvement specialist Lowe's Companies (LOW, $203.74) and discount store BJ's Wholesale Club Holdings (BJ, $68.92).
It's been a mixed earnings season so far. Through Aug. 5, three-quarters of S&P 500 companies exceeded analysts' average earnings per share (EPS) estimates. Furthermore, the 75% of S&P 500 companies that beat Wall Street estimates did so by 3.4%, on average. However, both beat rates were below the five-year averages of 77% and 8.8%, respectively, according to John Butters, senior earnings analyst at FactSet.
As for retailers, those in the consumer discretionary sector are reporting the biggest bottom-line misses – falling short of consensus estimates by 8.9%, on average, Butters says. Consumer staples stocks, on the other hand, are surpassing analysts' EPS expectations at an average rate of 4.8%.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Walmart's a Solid Choice, Despite Short-Term Troubles
When Walmart steps into the earnings confessional ahead of Tuesday's open, analysts, on average, expect the retailer to report earnings of $1.60 per share, down 10.1% on a year-over-year (YoY) basis. Revenue is projected to rise 7% to $150.8 billion.
But lackluster Q2 results from the world's largest retailer may already be priced into the stock. In late July, WMT shares tumbled after the company lowered its second-quarter and full-year guidance, saying higher food and fuel costs were hurting consumer spending.
"The trifecta of pressures facing consumers is accelerating (as has been noted by several retailers in recent updates), namely inflation, a normalization in wallet spend, and a slowing housing market, which combines with two years of elevated full-price selling and rising operating cost pressures," says Deutsche Bank analyst Krisztina Katai (Buy).
Despite these near-term headwinds, Raymond James analyst Bobby Griffin maintains a "long-term favorable view" on the Dow Jones stock, and thinks its "defensible attributes alongside best-in-class omni-channel capabilities, financial strength and leadership leave it positioned well for better performance in the coming quarters." He adds that Walmart's "top-line momentum remains solid, with management raising its second-quarter and full-year sales outlook driven by continued market share gains in food and consumables."
Analysts Are Split Ahead of Lowe's Q2 Earnings Report
Lowe's Companies will report its second-quarter results the morning of Aug. 17. The company beat on its bottom line in Q1, but reported top-line results that fell short of what analysts were expecting. This time around, consensus estimates are for LOW to report earnings of $4.62 per share (+8.7% YoY) and revenue of $28.1 billion (+1.8% YoY).
Following a late-June call with management, Oppenheimer analyst Brian Nagel came away feeling "encouraged" about Lowe's ability to navigate through a post-pandemic consumer backdrop. "Given a still significant skew to do-it-yourself, LOW is well-positioned to capitalize upon a potential shift to DIY, should macro conditions deteriorate, rendering pro services less affordable," says Nagel, who rates the stock at Outperform.
But not all analysts are as upbeat. CFRA Research analyst Kenneth Leon recently lowered his rating on LOW stock to Hold from Buy. "Home improvement spending is expected to see moderate growth in 2023 as sales of existing and new homes slow, mortgage rates rise, and limited house price appreciation dampens home remodeling," Leon writers in a note to clients. "We think higher cost of living for U.S. households could also weaken demand in Do-It-Yourself (DIY) and PRO segments. Building products and appliance costs are likely to stay high."
Higher Costs Expected to Pressure BJ's Q2 Profit
Warehouse clubs like BJ's Wholesale Club Holdings have been solid choices for investors in 2022. BJ stock is up roughly 3% for the year-to-date, compared to a more than 11% decline for the S&P 500.
BJ has shown strength off the stock charts, as well. In Q1, the company reported double-digit year-over-year growth on both its top and bottom lines. Analysts are anticipating solid revenue growth in its second quarter, as well, with the consensus estimate of $4.6 billion up 10% over the year-ago figure. However, earnings per share are expected to decline 4.9% to 78 cents.
This isn't too much of a surprise, however. During the company's first-quarter earnings call, CEO Bob Eddy said BJ's is still battling elevated supply chain and fuel costs, which can eat into profits.
Be that as it may, Deutsche Bank analyst Krisztina Katai (Buy) remains bullish. "We anticipate a second-quarter beat at BJ, stemming from solid comps (heavy grocery exposure) and better gas profitability, Katai writes.
BJ will report its second-quarter results ahead of Thursday's open.
-
Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
-
How to Manage Risk With Diversification"Don't put all your eggs in one basket" means different things to different investors. Here's how to manage your risk with portfolio diversification.
-
The Best Retail Stocks to Buy This Holiday SeasonE-commerce is a growing trend, but most folks still prefer to shop in stores. That makes these dominant retail stocks worth a closer look.
-
Stock Market Today: Dow, S&P 500 Hit New Highs on Black FridaySentiment was bullish on the final trading session of November, with chip stocks leading the charge.
-
Stock Market Today: Stocks Rally Despite Rising Geopolitical TensionThe main indexes were mixed on Tuesday but closed well off their lows after an early flight to safety.
-
Lowe's Stock Is Falling After Earnings. Here's WhyLowe's stock is lower Tuesday as Wall Street weighs a beat-and-raise quarter against declining revenue. This is what you need to know.
-
Why Walmart Stock's a Buy After Its Beat-And-Raise QuarterWalmart is the best Dow Jones stock Tuesday after the retail giant's solid earnings report and outlook and Wall Street thinks it's just getting started. Here's what they're saying.
-
Why Is Warren Buffett Selling So Much Stock?Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
-
If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have TodayGoogle parent Alphabet has been a market-beating machine for ages.
-
Stock Market Today: Stocks Retreat Ahead of Nvidia EarningsMarkets lost ground on light volume Wednesday as traders keyed on AI bellwether Nvidia earnings after the close.
