Thursday, February 19, 2015
Some lingering questions about the Greece situation appear to be weighing on stocks at the open. But earnings reports from Wal-Mart (WMT), Priceline (PCLN) aren’t helping sentiment either.
Wal-Mart’s pay-raise announcement is getting all the attention, but its earnings report offered a mixed picture – it beat on EPS, modestly missed on revenues and offered underwhelming guidance. Priceline had a somewhat similar issue in its quarterly release – it beat on Q4 results, but came up short on the guidance front.
On the positive side for Wal-Mart, the company’s U.S. same-store sales growth of +1.2% is the best we have seen from them in a few years and a represents an acceleration from the preceding quarter. This could be interpreted to mean the beneficial effect of the oil price drop, which is something that many investors have been holding out hopes for. In fact, the stock market reaction to Retail sector results thus far have been the most positive of all sectors.
Including this morning’s reports from Wal-Mart, Priceline and others, we now have results from 427 S&P 500 members, with the Retail sector as the only one with any sizable number of reports still awaited. Including Wal-Mart, we now have seen Q4 results from 23 of the 43 Retail sector companies in the S&P 500 index, which, combined, account for 68.9% of the sector’s total market capitalization.
Total earnings for these retailers are up +2.2% on +5.6% higher revenues, with 69.6% beating EPS estimates and 47.8% coming ahead of revenue expectations. Relative to the sector’s earnings performance over the past year or so, the earnings growth rate and beat ratio are tracking higher while the revenue side is tracking lower. Margin pressures have been a recurring theme for the retail sector results in recent quarters and we are seeing the same issue in play this time around as well — a function of the uber-competitive landscape in the industry.
Sheraz Mian
Director of Research
Note: In order to get an email alert each time this author publishes a new article, click on the ‘Follow Author’ link at the bottom of the top-right box of links.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment