CHICAGO, Nov. 24, 2014 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Hewlett-Packard ( NYSE:HPQ-Free Report), Tiffany ( NYSE:TIF-Free Report), Hormel Foods ( NYSE:HRL-Free Report), Wal-Mart ( NYSE:WMT-Free Report) and Macy's ( NYSE:M-Free Report).
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Q3 Earnings Season Mostly Behind Us Now
We don't have much in terms of earnings releases this Thanksgiving Day week, but we still have 69 companies releasing results, including 7 S&P 500 members. The Q3 earnings season is mostly behind us, with results from 486 S&P 500 members already known. Most of this week's reports are coming out on Tuesday, including Hewlett-Packard ( NYSE:HPQ-Free Report), Tiffany ( NYSE:TIF-Free Report), and Hormel Foods ( NYSE:HRL-Free Report). By the end of this week, we will have seen Q3 results from 493 of the S&P 500 members.
The focus lately has been on the Retail sector and we have a number of retailers coming out with results this week as well. Investors have broadly been happy with the results from some of the sector leaders like Wal-Mart ( NYSE:WMT-Free Report) and Macy's ( NYSE:M-Free Report). But that's likely more due the extremely low expectations than absolute outperformance. The effect of the secular migration of traffic from the physical domain to the digital one has been an ongoing issue with the sector leaders, though a number of these players are starting to see the online offering as an integral part of their overall customer experience. But it's still an evolving picture.
Macy's omni-channel strategy has been one of the most successful execution of this concept in the space. But Wal-Mart, which came out with positive Q3 results on the back of first same-store sales growth in the home market, has been making good progress on its online presence. The company has been making aggressive investments in its online presence and that has started showing up in its results. Wal-Mart's online sales were up +21% in Q3, a solid performance but lower than the first-half 2014 growth pace of about +27%. The recent drop in gasoline prices has been beneficial to Wal-Mart's target market and will raise hopes for a better holiday season in that market segment.
On top of these structural issues facing the industry, retailers have to contend with the still-weak condition of household finances. The labor market is no doubt improving and that has started to show up in measures of consumer confidence. But wage growth has been essentially stagnant, restricting households' buying power. The recent drop in gasoline prices should help this holiday season, but overall it has been a tough backdrop for retailers. No doubt the stock-price performance of the retail sector in the S&P 500 has been one of the weakest in the index – up +8% vs. a gain of +11.6% for the index as a whole in the year-to-date period.
Sector Results Thus Far
With respect to the sector's performance thus far, total earnings for 40 Retail sector companies in the S&P 500 that have already reported Q3 results are up +2.4% on +5.3% higher revenues, with 67.5% beating earnings estimates and 55% coming ahead of top-line expectations. This is the second lowest earnings growth performance of all 16 sectors (Autos is the weakest) in the index. The earnings growth rate for the sector is roughly in line with what we have been seeing from the sector in other recent quarters.
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