Amid a backdrop of better-than-expected third-quarter GDP growth of 5%, along with improving unemployment rate and increasing consumer confidence, retailers seem to be rejoicing this holiday season. All the Christmas ho ho and the fun and frolic to welcome 2015 reflected in the market run of many retailers yesterday.
Some of the retailers that reached the 52-week high spot yesterday were Carter’s Inc. (CRI), The Buckle Inc. (BKE), Dillard’s Inc. (DDS), The Kroger Co. (KR), Leggett & Platt Inc. (LEG), Lowe’s Companies Inc. (LOW), Macy’s Inc. (M), Ralph Lauren Corp. (RL) and SUPERVALU Inc. (SVU).
Of the outperformers yesterday, we bring you 2 retail stocks that show promise and will enrich your portfolio, based on their Zacks Rank, favorable estimate revisions and impressive expected earnings growth rate.
We suggest investing in The Kroger Co., one of the nation’s largest grocery retailers, which hit a 52-week high of $64.83 on Dec 30, 2014. The stock holds a Zacks Rank #2 (Buy) and has surged 63.2% year to date.
Though the stock looks pricey with a forward P/E (price-to-earnings) multiple of 19.1, it should not disappoint investors, given the company's long-term expected earnings growth rate of 12%. This Cincinnati, OH-based company delivered an average positive earnings surprise of 6.3% over the trailing four quarters. Moreover, the company’s Zacks Consensus Estimate for fiscal 2014 and 2015 have moved up considerably in the last 30 days, indicating a positive earnings trend, going forward. The company is expected to register earnings growth of 18.2% in fiscal 2014 and 9.5% in fiscal 2015.
Another stock that investors may look forward to is Lowe’s Companies Inc., one of the world’s largest home improvement retailers, which carries a Zacks Rank #2. The stock hit a 52-week high of $68.88 yesterday, before closing at $68.55. Besides, it trades at a forward P/E of 25.7x, a discount to the industry average and looks attractive from an earnings growth perspective.
The company has a long-term earnings growth rate of 15.7% and has witnessed upward estimate revisions for both fiscal 2014 and 2015 in the last 30 days. Share price of this Mooresville, NC-based company has surged 38.3% year to date. The company is expected to register earnings growth of 23.5% in fiscal 2014 and 22% in fiscal 2015.
We believe that the above stocks boast strong fundamentals and growth prospects that can satisfy investors’ appetite for equity market winners.
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