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%.
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.
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“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).</…….