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Retail ETFs in Focus Ahead of Big-Box Q4 Earnings

The retail sector is in focus with the earnings releases of big retailers coming up. Big-box retailers like Wal-Mart WMT, Home Depot HD, Lowe’s LOW and Target TGT, as well as store channels like Nordstrom JWN and Kohls KSS are expected to report this week and in the coming weeks.

On the S&P 500 Index, 17 out of 33 retailers have already reported. Earnings of these companies are up 72.4% from the same period last year on 10.7% higher revenues, with 88.2% beating EPS estimates and 58.8% beating revenue estimates. Overall, the retail sector is expected to report earnings growth of 28.1% on 6.4% revenue growth (read: 5 Sector ETFs to Play for Revenue Growth in Q4).

Given this, traditional retail ETFs are in focus. SPDR S&P Retail ETF XRT and VanEck Vectors Retail ETF RTH have gained 1.7% and 5.6%, respectively, so far this year.

What Our Model Unveils for Retailer Earnings

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.

Wal-Mart has an Earnings ESP of +1.29% and a Zacks Rank #3. The company saw a positive earnings estimate revision of a couple of cents over the past seven days for the to-be-reported quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. Wal-Mart delivered an average four-quarter earnings surprise of 8.19%. Wal-Mart is scheduled to report on Feb 20 before market open (see: all the Consumer Discretionary ETFs here).

Home Depot has an Earnings ESP of +2.99% and a Zacks Rank #3. The company saw a positive earnings estimate revision of a couple of cents over the past seven days for the to-be-reported quarter. It delivered an average earnings surprise of 1.76% in the last four quarters. Home Depot is scheduled to report on Feb 20, before market open.

Target has an Earnings ESP of -0.56% and a Zacks Rank #2. The company saw no earnings estimate revision over the past month for the to-be-reported quarter and delivered an earnings surprise of 30.84% for the last four quarters. Target will report earnings on Mar 5 before the opening bell.

Lowe’s has an Earnings ESP of +1.35% and a Zacks Rank #3. The company witnessed a positive earnings estimate revision of a couple of cents over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 2.63%, on average, in the last four quarters. LOW has a VGM Score of B and is slated to report earnings on Mar 6.

Nordstrom has an Earnings ESP of -10.71% and a Zacks Rank #3. It saw a negative earnings estimate revision of a penny for the to-be-reported quarter in the past seven days. The company delivered an earnings surprise of 87.79%, on average, over the past four quarters. It is scheduled to report earnings on Mar 5 after the closing bell.

Kohl’s has an Earnings ESP of +5.76% and a Zacks Rank #4 (Sell). It saw a negative earnings estimate revision of a penny for the to-be-reported quarter in the past seven days. Kohl’s delivered a negative average earnings surprise of 9.91% in the last four quarters. The company is expected to report before the opening bell on Mar 12.

ETFs in Focus

SPDR S&P Retail ETF (XRT)

SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large-, mid- and small-cap stocks. It holds 76 well-diversified stocks in its basket, with none making up for more than a 2% share. Additionally, SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, specialty retail, automotive retail and broad-line retail (read: 4 ETF Areas to Play Despite Soft January Retail Sales).

SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $419.8 million and an average trading volume of 6.5 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.

VanEck Vectors Retail ETF (RTH)

VanEck Vectors Retail ETF provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. VanEck Vectors Retail ETF is highly concentrated on the top firm with more than 21% exposure, while the other firms hold no more than 9.3% share.

VanEck Vectors Retail ETF has amassed $182.1 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 6,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 with a Medium risk outlook.

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Target Corporation (TGT) : Free Stock Analysis Report

Kohl's Corporation (KSS) : Free Stock Analysis Report

Walmart Inc. (WMT) : Free Stock Analysis Report

Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report

The Home Depot, Inc. (HD) : Free Stock Analysis Report

Nordstrom, Inc. (JWN) : Free Stock Analysis Report

SPDR S&P Retail ETF (XRT): ETF Research Reports

VanEck Retail ETF (RTH): ETF Research Reports

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