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Retail ETFs in Focus Ahead of Big-Box Q1 Earnings

The first-quarter earnings season has effectively come to an end for most of the sectors, save retail, nearly 33% of which is still to report. Total earnings for the companies that have reported so far are up 62.3% on 15.8% revenue growth, with 90% beating EPS estimates and 80% beating on revenues. The growth pace and surprises seem robust and are tracking above the four-quarter average (read: ETFs to Play the Strong Q1 Earnings Trend).

Retail sector results reported so far were primarily from online vendors and restaurant players. The focus now shifts to traditional brick-and-mortar retailers like Wal-Mart WMT, Home Depot HD, Lowe’s LOW and Target TGT, and store channels like Nordstrom JWN and Kohls KSS that are expected to report this week and the next. The stocks of most of these traditional operators have been performing well as cheap money, rapid COVID-19 vaccination and business re-openings spurred consumer spending, leading to an increase in retail sales.

As a result, retail ETFs SPDR S&P Retail ETF XRT and First Trust Nasdaq Retail ETF FTXD have gained 0.7% and 0.8%, respectively, in the past month while VanEck Vectors Retail ETF RTH has shed 1%.

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

A Peek at the Earnings Lineup

Wal-Mart is scheduled to report on May 18 before market open. It has a Zacks Rank #3 and an Earnings ESP of +1.59%, indicating reasonable chances of beating estimates this quarter. The company saw no earnings estimate revision over the past 30 days for the to-be-reported quarter and delivered an average earnings surprise of 9.95% in the last four quarters. Additionally, the company has a VGM Score of A (see: all the Consumer Discretionary ETFs here).

Home Depot has a Zacks Rank #2 and an Earnings ESP of +8.15%, indicating higher chances of beating estimates this quarter. It saw positive earnings estimate revision of 7 cents for the to-be-reported quarter in the past seven days. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a pretty good indicator of some favorable trends for the stock. Additionally, it delivered an average earnings surprise of 1.18% in the last four quarters and has a VGM Score of C. The company is expected to report earnings before the opening bell on May 18.

Lowe’s is slated to report earnings before the bell on May 19. The stock has a Zacks Rank #2 and an Earnings ESP of +2.73%. The company has seen positive earnings estimate revision of 3 cents over the past seven days for the to-be-reported quarter and delivered an earnings surprise of 17.63%, on average, in the last four quarters. The stock has a VGM Score of C.

Target is also likely to report earnings on May 19 before the opening bell. It has a Zacks Rank #2 and an Earnings ESP of +20.84%. The company saw positive earnings estimate revision of couple of cents over the past seven days for the to-be-reported quarter and delivered an average earnings surprise of 53.30% in the last four quarters. It has a VGM Score of A.

Nordstrom, which will likely report earnings on May 25 after the closing bell, has a Zacks Rank #3 and an Earnings ESP of 0.00%. It has seen no earnings estimate revision for the to-be-reported quarter in the past 30 days. The company delivered an earnings surprise of 516.76%, on average, over the past four quarters. It has a VGM Score of B (read: Favorite Sectors of Q1 Earnings & Their Best ETFs, Stocks).  

Kohls has a Zacks Rank #1 and an Earnings ESP of +155.56%. It saw positive earnings estimate revision of 13 cents for the to-be-reported quarter in the past 30 days. Additionally, it delivered an average earnings surprise of 52.46% in the last four quarters and has a VGM Score of A. The company is expected to report before the opening bell on May 20.

Conclusion

With some earnings surprises in the cards, retail ETFs are expected to see smooth trading in the days ahead.

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Target Corporation (TGT): Free Stock Analysis Report
 
The Home Depot, Inc. (HD): Free Stock Analysis Report
 
Walmart Inc. (WMT): Free Stock Analysis Report
 
Lowes Companies, Inc. (LOW): Free Stock Analysis Report
 
Nordstrom, Inc. (JWN): Free Stock Analysis Report
 
Kohls Corporation (KSS): Free Stock Analysis Report
 
SPDR-SP RET ETF (XRT): ETF Research Reports
 
VANECK-RETAIL (RTH): ETF Research Reports
 
FT-NDQ RETAIL (FTXD): ETF Research Reports
 
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