We are in the last major week of the third-quarter 2022 earnings season. So far, corporate America has shown mixed results. Although the earnings growth rate has declined systematically, margin pressures have come in less than expected.
Most of the sectors have already reported with the notable exception being the retail sector. Last quarter was a mixed one for retailers. Overall demand remains solid owing to strong savings by Americans. However, several retailers have warned of inventory accumulation and stiff margin pressures.
We have selected five retailers that are set to beat earnings results this month. These companies are – The TJX Companies Inc. TJX, Macy’s Inc. M, Ross Stores Inc. ROST, Dollar Tree Inc. DLTR and Bath & Body Works Inc. BBWI.
Q3 Earnings Results So Far
Our third-quarter earnings estimate for the market’s benchmark, the S&P 500 Index, have shown a gradual decline in the past three and a half months. As of Nov 11, 461 companies on the S&P 500 Index have reported results.
Total earnings of these companies are up 2.6% from the same period last year on 12.4% higher revenues, with 69.4% beating EPS estimates and 67.9% beating revenue estimates. Our current estimate has projected that total earnings of the S&P 500 Index are expected to be up 1.5% year over year on 11.4% higher revenues.
Our Top Picks
We have chosen five retailers that will report earnings results this month. Each of these stocks carries a Zacks Rank #3 (Hold) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that for stocks with the combination of a Zacks Rank #3 or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are anticipated to appreciate after their earnings releases. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The chart below shows the price performance of our five picks in the last quarter.
Image Source: Zacks Investment Research
The TJX Companies’ off-price business model, strategic store locations, impressive brands and fashion products, as well as supply-chain management have been working well. TJX has been benefiting from its solid store and e-commerce growth efforts. The TJX Companies is optimistic about growing its global store base by at least another 1,500 stores in the current locations.
Apart from this, TJX has been witnessing improved pre-tax profit margin, with management raising its guidance for the same for fiscal 2023. The TJX Companies now expects fiscal 2023 adjusted pretax profit margin of 9.7-9.9%.
TJX has an Earnings ESP of +0.63%. It has an expected earnings growth rate of 9% for the current year (ending January 2023). The TJX Companies recorded earnings surprises in three out of the last four reported quarters, with an average beat of 1.7%. TJX is set to release earnings results on Nov 16, before the opening bell.
Bath & Body Works operates as a specialty retailer of home fragrance, body care, and soaps and sanitizer products. BBWI sells its products under Bath & Body Works, White Barn, and other brand names through specialty retail stores and websites located in the United States and Canada. BBWI also sells through international stores operated by partners under franchise, license, and wholesale arrangements.
Bath & Body Works has an Earnings ESP of +62.21%. BBWI recorded earnings surprises in the last four reported quarters, with an average beat of 26.1%. Bath & Body Works is set to release earnings results on Nov 16, after the closing bell.
Macy‘s is an omnichannel retail organization, operating stores, websites and mobile applications under the Macy’s, Bloomingdale’s, and bluemercury brands. M has undertaken initiatives to gain market share, better engage with customers, and maintain a decent financial profile. Macy’s believes that the Polaris Strategy positions it well to navigate through the dynamic retail landscape. Macy’s intends to focus on in-demand categories.
Macy’s has an Earnings ESP of +18.92%. The company recorded earnings surprises in the last four reported quarters, with an average beat of 80.8%. M is set to release earnings results on Nov 17, before the opening bell.
Ross Stores is gaining from robust customer demand, accelerated vaccination rates, government stimulus payments and easing of COVID-19 restrictions. ROST’s sales benefited from broad-based growth across certain merchandise categories and regions, as well as robust comparable store sales.
The children and men’s categories performed well in the holiday selling period, and the Midwest and Southeast regions were the outperforming regions for Ross Stores. Sales trends were also robust at the dd’s DISCOUNTS business.
ROST has an Earnings ESP of +3.13%. Ross Stores recorded earnings surprises in three out of the last four reported quarters, with an average beat of 14.1%. ROST is set to release earnings results on Nov 17, after the closing bell.
Dollar Tree has provided a robust view for fiscal 2022 sales, despite concerns regarding margins and the bottom line. For fiscal 2022, DLTR expects consolidated net sales of $27.85-$28.10 billion compared with the $27.76-$28.14 billion mentioned earlier.
Dollar Tree anticipates higher comps growth in fiscal 2022 to be offset by slightly reduced square footage growth compared with the prior view. DLTR anticipates enterprise comps growth of mid-single digits for fiscal 2022, including a high-single-digit increase in the Dollar Tree segment and positive comps in the Family Dollar segment.
DLTR has an Earnings ESP of +6.57%. It has an expected earnings growth rate of 25.5% for the current year (ending January 2023). The Zacks Consensus Estimate for current-year earnings improved 0.1% over the last 30 days.
Dollar Tree recorded earnings surprises in the last four reported quarters, with an average beat of 8.6%. The company is set to release earnings results on Nov 22, before the opening bell.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Zacks Names “Single Best Pick to Double”
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Macy’s, Inc. (M): Free Stock Analysis Report
The TJX Companies, Inc. (TJX): Free Stock Analysis Report
Dollar Tree, Inc. (DLTR): Free Stock Analysis Report
Ross Stores, Inc. (ROST): Free Stock Analysis Report
Bath & Body Works, Inc. (BBWI): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.