Zacks Earnings Trends Highlights: Wal-Mart and FedEx

CHICAGO, May 23, 2014 /PRNewswire/ -- Zacks Director of Research Sheraz Mian says, "Stock prices for the Retail sector stocks are down -5.8% year to date vs. a gain of +2.9% for the S&P 500 as a whole."

Another Weak Earnings Season Coming to an End

First-quarter results from the Retail sector in recent days have been even weaker than what we saw from other sectors. As with other weather exposed sectors, most retailers predictably cited the tough weather at the beginning of the quarter for their underperformance. But the sector seems to be fighting more than just weather, as barring a few exceptions most of them didn't have much positive to say about the current and coming quarters either.

No doubt, the Retail sector has been the weakest among the 16 Zacks sectors year to date in terms of price performance – stock prices for the Retail sector stocks are down -5.8% year to date vs. a gain of +2.9% for the S&P 500 as a whole.  

The Q1 earnings season is almost over, with results from only 15 S&P 500 members still awaited at this stage. The reporting cycle has ended for 11 of the 16 Zacks sectors and even the Retail sector now has Q1 results from 94.8% of the sector's total market capitalization. As such, the remaining reports are unlikely to change the Q1 earnings picture in any meaningful way.

What we saw this earnings season was anemic growth and continuation of the negative guidance that has become a recurring theme quarter after quarter for more than a year now.

This didn't come as a surprise, as earnings growth has been hard to come by for some time and Q1's unique issues only added to those pre-existing challenges. Weather became a recurring theme in everything related to Q1. The U.S. economy's growth numbers for the quarter provided a good context for the earnings performance of Wal-Mart (NYSE:WMT-Free Report), FedEx (NYSE:FDX-Free Report) and many others in Q1. With respect to the economy, however, more recent economic data is pointing towards improved growth momentum from Q2 onwards, even though the pathway to the more aggressively optimistic GDP growth estimates is unclear at this stage.

We are not seeing anything comparable on the earnings front, with estimates for the current period starting to follow the trend that has been in place for almost two years now – they are going down. This is a trend that has been in place for almost two years now, with the pace expected to accelerate further in the coming days.

Q1 Scorecard (as of May 22nd, 2014)

We now have Q1 results from 485 S&P 500 members that combined account for 97.6% of the index's total market capitalization. Total earnings for these 485 companies are up +1.3% from the same period last year on +2.7% revenues, with 67.8% beating EPS estimates and 51.8% coming out with positive revenue surprises.

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