4 Must-Buy Retail Stocks Ahead of Their Earnings This Month

By Nalak Das Zacks December 4, 2019 Retail is the only major sector in which a few big corporates are yet to declare results this reporting cycle. Despite several microeconomic, macroeconomic and geopolitical headwinds, third-quarter earnings were not as weak as expected initially. However, overall earnings are still expected to dip.

At present, total third-quarter earnings for the S&P 500 Index are expected to be down 1.8% from the prior-year period while revenues are expected to increase 4.3%. This indicates improvement from an earnings decline of 5% on 4.2% higher revenues, expected at the beginning of the reporting cycle.

Retail Sales in Q3

Overall retail sales in the third quarter of 2019 were mixed. In the first two months of the period, retail sales grew 0.8% and 0.6%, respectively. However, in September, retail sales declined 0.3%. In fact, a decline was noted for the first time since February.

Core retail sales in September (excluding automobiles, gasoline, building materials and food service) decreased 0.1% against an increase of 0.2% in August. However, year over year, retail sales increased 4.1% in September.

Meanwhile, U.S. consumer spending remained firm and is driving the country’s GDP. In the third quarter of 2019, the U.S. economy grew 2.1%, surpassing the consensus estimate of 1.6%, primarily buoyed by a 2.9% increase in consumer spending. Household spending rose a seasonally adjusted 0.2% in September from August.

Additionally, after a slump in September, retail sales picked up in October, rising 0.3% and beating the consensus estimate of growth of 0.2%.

4 Retailers Poised to Beat Earnings Estimates

Below are four stocks set to beat earnings estimates this time around. 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. Each of our picks carries either a Zacks Rank # 1 or 2 and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here. (READ MORE)