Wal-Mart, Macy's, Target, Dollar Tree and Nordstrom are part of Zacks Earnings Preview:

News provided by

Aug 19, 2013, 09:30 ET

CHICAGO, Aug. 19, 2013 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Wal-Mart (NYSE:WMT-Free Report), Macy's (NYSE:M-Free Report), Target (NYSE:TGT-Free Report), Dollar Tree (Nasdaq:DLTR-Free Report) and Nordstrom (NYSE:JWN-Free Report).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

To see more earnings analysis, visit http://at.zacks.com/?id=3207.

Every day, Zacks.com makes their Bull Stock of the Day available, free of charge. To see it, click here.

Retail Earnings Still in the Spotlight

The Q2 earnings season is effectively over, with results from 465 S&P 500 companies, accounting for almost 95.6% of the index's total market capitalization, already out (as of Friday, August 16th). The earnings season has ended for 9 of the 16 Zacks sectors, including Finance, Energy, Basic Materials, and Utilities.

Retail is the only sector that has a large number of reports still due, with 18 of the remaining 35 S&P 500 companies from the sector. But having seen Q2 results from such sectors bellwethers as Wal-Mart (NYSE:WMT-Free Report) and Macy's (NYSE:M-Free Report), we probably have a good enough sense of what to expect from the remaining Retail sector reports. The sector is heavily represented in this week's small line-up of earnings releases, with 32 of the week's 94 reports from the Retail Sector. By the end of this week, we will have seen Q2 results from 487 S&P 500 members.

Wal-Mart's soft outlook for the second half of the year is a material negative signal for the sector's outlook. After all, Wal-Mart alone accounts for almost 22% of the sector's total earnings. Target (NYSE:TGT-Free Report) and Dollar Tree (Nasdaq:DLTR-Free Report) reporting this week will likely not do any better, but the Wal-Mart news has brought down expectations for these and other discounters. The sector's problems aren't restricted to the lower-priced end alone as the weak guidance from Macy's and Nordstrom (NYSE:JWN-Free Report) show.

Total earnings for the 30 S&P 500 members from the Retail sector (out of 48 retailers) that have already reported are up +7.8% on +3.9% higher revenues. The earnings beat ratio has been 53.3%, while 40% of the retailers have come ahead of revenue expectations. The earnings and revenue growth rates for these 30 companies are roughly in-line with what we saw from this group in Q1 and other recent quarters, though the earnings beat ratio is clearly on the weak side. The 53.3% earnings beat ratio for these 30 companies compares to 63.3% in Q1 and the 4-quarter of 64.2% for the same group of companies.

The Q2 Earnings Scorecard

Total earnings for the 465 S&P 500 companies that have reported results already are up +2.7%, with 66% beating earnings expectations and a median surprise of +2.9%. Most of this growth has come from top-line gains, with total revenues for these 465 companies up +2% and 52.7% beating revenue expectations.

The earnings growth rate of +2.7% compares to +2.4% earnings growth rate in Q1 and the 4-quarter average growth pace of +2.9% for the same set of 465 companies. The earnings beat ratio, which was tracking a bit lower earlier in the reporting cycle, has caught on with historical levels. On the revenue side, the growth of +2% compares to +1.8% in Q1 and the 4-quarter average of +2.9% for this group of 465 S&P 500 companies. The revenue beat ratio of 52.7%, however, is decidedly better than what we saw in Q1 (41.9%) and the 4-quarter average (45.5%).

Strong results from the Finance sector are playing a big role in giving respectability to the aggregate Q2 data. It is very hard to be satisfied with the picture once Finance is excluded from the numbers. With all of the Finance sector's results already in, total earnings for the sector are up +30% on +8.5% higher revenues, with beat ratios of 76.9% for earnings and 65.4% for revenues. Finance's performance has been way better than what we have seen from the group in recent quarters.

Strip out Finance and total earnings growth for the S&P 500 turns negative – down -3%. This is weaker than what these same companies reported in Q1. Weakness in the Technology sector spotlights the broad growth challenge outside of Finance, though Basic Materials (total earnings down -11.1%) and Energy (-12.7%) also played roles.

The composite Q2 growth rate, where we combine the results for the 465 that have come out with the 35 still to come, is for +2.6% total earnings growth on +2% higher revenues. Excluding Finance, the composite earnings growth rate drops to a decline of -2.8%. Bottom line, the earnings picture outside of Finance is very weak.

About the Zacks Rank

Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+3% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

Zacks "Profit from the Pros" e-mail newsletter offers continuous coverage of the industries and the stocks poised to outperform the market. Click to subscribe to this free newsletter today.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Get the full Report on WMT - FREE

Get the full Report on M - FREE

Get the full Report on TGT - FREE

Get the full Report on DLTR - FREE

Get the full Report on JWN - FREE

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

[email protected]

http://www.zacks.com

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

SOURCE Zacks Investment Research, Inc.