Retail has been the hottest sector lately. The overall strength of the sector can be attributed to strong corporate earnings coupled with higher consumer spending and a booming economy. Total earnings from 85.1% of the sector’s total market capitalization reported so far are up 34.9%% on 9.7% higher revenues, with 91.7% of the companies beating on earnings and 75% exceeding top-line estimates.
Both the growth rates and beat ratios are encouraging, given that these are tracking above the historical periods. Positive share price response from Wal-Mart (WMT – Free Report), Target (TGT – Free Report), Nordstrom (JWN – Free Report), and Kohl’s (KSS – Free Report) offset negativity of some weak results or decline in share price at J.C. Penney (JCP – Free Report), Macy’s (M – Free Report), and Home Depot (HD – Free Report) .
Let’s dig into the details of the earnings releases:
Earnings Sending Stocks Higher
The world’s largest retailer, Wal-Mart, rallied 6.6% in response to the earnings announcement. It surpassed earnings and revenue estimates by 8 cents and $2.3 billion, respectively. Additionally, the company recorded the strongest growth in more than a decade in sales at established stores and raised its earnings per share guidance to the range of $4.90-$5.05 from $4.75-$5.00 for the full fiscal year.
Specialty retailer, Nordstrom emerged as the real champion in the Q2 earnings season as the stock gained 7.3% in response to earnings announcement. The company beat the Zacks Consensus Estimate for earnings by 11 cents and for revenues by $80 million. It also raised its earnings per share guidance to $3.50-$3.65 from $3.35-$3.55 and revenue guidance to $15.4-$15.5 billion from $15.2-$15.4 billion.
Big-box retailer, Target, rose 5% to an all-time high in response to its best quarterly results in more than a decade. The company topped the Zacks Consensus Estimate by 7 cents for earnings and by $441 million for revenues. It raised its earnings estimate from 90 cents to $1.00-$1.20 for the third quarter and from $5.15-$5.45 to $5.30-$5.50 for the fiscal full year.
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