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Retail ETFs in Focus Ahead of Big-Box Q1 Earnings

The retail sector is in focus now with the earnings releases of big retailers like Wal-Mart WMT, Home Depot HD, Lowe’s LOW and Target TGT, as well as store channels like Nordstrom JWN and Kohl’s KSS coming up.

So far, 21 out of 34 retailers on the S&P 500 Index have already reported. Earnings of these companies are up 54.5% from the same period last year on 7.4% higher revenues, with 66.7% beating EPS estimates and 57.1% beating revenue estimates. Overall, the retail sector is expected to report earnings growth of 24.7% on 4.7% revenue growth (read: 5 Favorite Sector ETFs of Q1 Earnings).

Given this, traditional retail ETFs are in focus. SPDR S&P Retail ETF XRT and VanEck Vectors Retail ETF RTH have shed a modest 0.08% and 0.8%, 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 +1.65% and a Zacks Rank #3. The company saw no earnings estimate revision over the past 30 days for the to-be-reported quarter. Wal-Mart delivered an average four-quarter earnings surprise of 7.33%. Wal-Mart is scheduled to report on May 16, before market open (see: all the Consumer Discretionary ETFs here).

Home Depot has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). The company saw no earnings estimate revision over the past 30 days for the to-be-reported quarter. It delivered an average earnings surprise of 1.98% in the last four quarters. Home Depot is scheduled to report on May 14, before market open.

Target has an Earnings ESP of -1.61% 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 27.13% for the last four quarters. Target will report earnings on May 22 before the opening bell.
    
Lowe’s has an Earnings ESP of 0.00% and a Zacks Rank #4. The company witnessed no earnings estimate revision over the past 30 days for the to-be-reported quarter and delivered an earnings surprise of 3.18%, on average, in the last four quarters. LOW is slated to report earnings on May 28.

Nordstrom has an Earnings ESP of +66.67% 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 86.00%, on average, over the past four quarters. It is scheduled to report earnings on May 30 after the closing bell.

Kohl’s has an Earnings ESP of +121.95% and a Zacks Rank #3. It saw no earnings estimate revision for the to-be-reported quarter in the past seven days. Kohl’s delivered a negative average earnings surprise of 84.2% in the last four quarters. The company is slated to report before the opening bell on May 30.

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 79 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 (read: 4 Sector ETFs & Stocks Likely to Benefit Despite Soft Jobs Data).

SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $539.8 million and an average trading volume of 6 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 22% exposure, while the other firms hold no more than 9% share.

VanEck Vectors Retail ETF has amassed $205.7 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 #2 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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