Hewlett-Packard, Tiffany, Wal-Mart, Target and Best Buy are part of Zacks Earnings Preview

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Nov 25, 2013, 09:30 ET

CHICAGO, Nov. 25, 2013 /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), Wal-Mart (NYSE:WMT-Free Report), Target (NYSE:TGT-Free Report) and Best Buy (NYSE:BBY-Free Report).

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Earnings Season in the Last Stretch

We don't have much in terms of earnings releases this Thanksgiving Day week, but we still have 47 companies releasing results, including 5 S&P 500 members. The Q3 earnings season is mostly over, with results from 489 S&P 500 members, or 97.8% of the index's total membership, already known. Most of this week's reports are coming out on Tuesday, including Hewlett-Packard (NYSE:HPQ-Free Report) and Tiffany (NYSE:TIF-Free Report). By the end of this week, we will have seen Q3 results from 494 of the S&P 500 members.

Our overall verdict on the Q3 earnings season is favorable, particularly relative to the last few quarters. The fact that actual results have been better relative to the lowered pre-season expectations is no surprise given management team's impressive track record in under-promising and over-delivering. There is still not much growth and most companies are still guiding lower, prompting estimates for Q4 to come down. But whatever little growth we have in Q3 thus far is better than we have seen in recent quarters. And for those keeping records, the Q3 earnings season appears on track a new quarterly record for total earnings, surpassing the level achieved in Q2.

The Retail sector has been in focus lately, with the broadly underwhelming guidance from Wal-Mart (NYSE:WMT-Free Report), Target (NYSE:TGT-Free Report), Best Buy (NYSE:BBY-Free Report) and others pointing towards a soft holiday shopping season for the sector. Even before the earnings reports from these retailers, we knew that consumer spending growth had decelerated in Q3. We know that in the Q3 GDP report personal consumption expenditures were up only +1.5%, down from Q2's +1.8% growth pace. A low-growth environment forces retailers to rely on promotional efforts to grab more consumer dollars. But this zero-sum drive for market share where one company's gain is another's loss typically drives down margins for everyone.

Looked at this way, Wal-Mart's sub-par outlook may not solely be a function of under-pressured household finances, but also reflective of a hyper competitive retail environment where some operators are more than willing to sacrifice margins for more sales. Wal-Mart referred to this competitive dynamic in their earnings call, which apparently more than offset the beneficial effects of recent downtrend in gasoline prices.

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