Tag Archives: ROST

TJX Companies Earnings Preview: What to Watch

TJX Companies(NYSE:TJX) will kick off its new fiscal year with a first-quarter earnings report due out before the market opens on Tuesday, May 22. Expectations are high, given the off-price retailer’s recent sales growth rebound and new plans for higher cash returns to investors.

But TJX Companies will have to justify its premium stock price by showing improvements in its operating and financial results next week. Here are some of the trends that show how well the retailer is succeeding on these points.

Two customers shopping for clothes.

Image source: Getty Images.

Steady sales growth

Like its industry rival Ross Stores(NASDAQ:ROST), TJX Companies managed healthy sales growth in 2017, punctuated by accelerating gains over the critical holiday shopping period. Customer traffic was positive across its core TJ Maxx and Marshalls brands in the fourth quarter, leading to a 3% increase in comparable store sales, or sales at existing locations. Ross Stores posted a more robust 5% boost, and TJX Companies also modestly underperformed Target, which grew comps by 4% over the holidays.

CEO Ernie Herrman and his team are targeting a 2% comps improvement in 2018, which would match last year’s pace and keep steady with 1% to 2% increase that Ross Stores is expecting for the year. Executives said back in March that consolidation in the full price segment of the retailing industry is creating “abundant opportunities” for its buyers to pack its shelves with high quality merchandise, and so investors will be looking for signs of continued success here in the form of modestly positive comps and rising customer traffic.

Higher profits

Its off-price sales model produces consistent growth (revenue has ticked up at existing locations in each of the last 22 years) — but also generates impressive earning power. TJX Companies’ $2.6 billion of operating income last year drove a slight increase in bottom line profitability as net margin ticked up to 7.3% of sales from 7% a year ago. That put the retailer solidly ahead of full-price rivals like Target and Walmart, yet still behind apparel specialist Ross Stores.

ROST Profit Margin (TTM) Chart

Data source: ROST Profit Margin (TTM) data by YCharts.

Investors are hoping that its growing sales base will help TJX Companies continue its streak of modest profitability increases this year. Specifically, they’re looking for gross profit margin to tick up from the current 29% rate.

Given the positive customer traffic trends, management saw room for a “significant” increase in this metric back in March, and we’ll find out this week whether that’s still the case today.

Rising cash returns

TJX Companies’ generates plenty of cash each year, but that flow should be larger than normal in 2018. Tax law changes will boost net income, for example, while freeing the company to move at least $1 billion from its Canadian business into the U.S. segment.

Management is directing a large chunk of the resulting cash windfall toward the business through moves like higher wages, enhanced vacation benefits, and one-time bonuses. Investors stand to get significant increased returns, too, through a planned doubling of stock repurchase spending this year even as quarterly dividend payouts rise by 25%.

Look for executives to issue updated guidance on these capital spending plans as management tries to strike the right balance between investing in future growth and rewarding its shareholders.

Ross Stores (ROST) Receives $82.62 Consensus Target Price from Brokerages

Shares of Ross Stores (NASDAQ:ROST) have been assigned an average rating of “Buy” from the twenty-six ratings firms that are presently covering the firm, MarketBeat reports. Seven equities research analysts have rated the stock with a hold rating and nineteen have issued a buy rating on the company. The average 12 month target price among brokers that have issued a report on the stock in the last year is $82.62.

ROST has been the topic of a number of recent research reports. BMO Capital Markets restated a “hold” rating and issued a $78.00 target price on shares of Ross Stores in a report on Wednesday, March 7th. Morgan Stanley raised their target price on Ross Stores from $89.00 to $94.00 and gave the company an “overweight” rating in a report on Wednesday, March 7th. Buckingham Research restated a “neutral” rating and issued a $86.00 target price (up previously from $82.00) on shares of Ross Stores in a report on Wednesday, March 7th. Deutsche Bank initiated coverage on Ross Stores in a report on Monday, April 30th. They issued a “buy” rating and a $94.00 target price on the stock. Finally, OTR Global initiated coverage on Ross Stores in a report on Tuesday, May 8th. They issued a “positive” rating on the stock.

Get Ross Stores alerts:

In related news, CEO Barbara Rentler sold 32,430 shares of the stock in a transaction that occurred on Thursday, April 5th. The stock was sold at an average price of $79.53, for a total transaction of $2,579,157.90. Following the completion of the sale, the chief executive officer now directly owns 534,318 shares of the company’s stock, valued at $42,494,310.54. The sale was disclosed in a document filed with the Securities & Exchange Commission, which is accessible through this hyperlink. Also, insider Lisa R. Panattoni sold 12,471 shares of the stock in a transaction that occurred on Thursday, April 5th. The shares were sold at an average price of $79.48, for a total value of $991,195.08. Following the sale, the insider now directly owns 93,711 shares of the company’s stock, valued at $7,448,150.28. The disclosure for this sale can be found here. Insiders have sold 256,652 shares of company stock valued at $19,829,016 over the last ninety days. 2.30% of the stock is currently owned by company insiders.

Several institutional investors and hedge funds have recently modified their holdings of the stock. Lucia Wealth Services LLC purchased a new stake in Ross Stores in the first quarter worth $112,000. Well Done LLC purchased a new stake in Ross Stores in the first quarter worth $113,000. Cerebellum GP LLC purchased a new stake in Ross Stores in the fourth quarter worth $132,000. Ballew Advisors Inc purchased a new stake in Ross Stores in the first quarter worth $134,000. Finally, Sit Investment Associates Inc. increased its position in Ross Stores by 255.1% in the fourth quarter. Sit Investment Associates Inc. now owns 1,900 shares of the apparel retailer’s stock worth $152,000 after buying an additional 1,365 shares during the last quarter. 90.21% of the stock is owned by institutional investors.

Ross Stores traded down $0.95, hitting $82.48, on Friday, MarketBeat reports. The stock had a trading volume of 1,516,613 shares, compared to its average volume of 2,583,546. The firm has a market cap of $31.57 billion, a P/E ratio of 24.69, a PEG ratio of 2.07 and a beta of 1.06. The company has a debt-to-equity ratio of 0.10, a quick ratio of 0.78 and a current ratio of 1.64. Ross Stores has a 52 week low of $83.07 and a 52 week high of $84.50.

Ross Stores (NASDAQ:ROST) last announced its quarterly earnings results on Tuesday, March 6th. The apparel retailer reported $0.98 earnings per share (EPS) for the quarter, topping the consensus estimate of $0.93 by $0.05. The business had revenue of $4.07 billion for the quarter, compared to analyst estimates of $3.95 billion. Ross Stores had a return on equity of 44.53% and a net margin of 9.64%. equities analysts forecast that Ross Stores will post 4.03 earnings per share for the current fiscal year.

Ross Stores announced that its Board of Directors has approved a share buyback plan on Tuesday, March 6th that allows the company to buyback $200.00 million in shares. This buyback authorization allows the apparel retailer to repurchase shares of its stock through open market purchases. Shares buyback plans are typically a sign that the company’s management believes its stock is undervalued.

About Ross Stores

Ross Stores, Inc, together with its subsidiaries, operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brands in the United States. It primarily offers apparel, accessories, footwear, and home fashions. The company's Ross Dress for Less stores sell its products at department and specialty stores primarily to middle income households; and dd's DISCOUNTS stores sell its products at department and discount stores regular prices to customers from households with moderate income.

Analyst Recommendations for Ross Stores (NASDAQ:ROST)

Diamonds In The Rough Of The Consumer Cyclicals Sector

The Consumer Cyclicals sector currently earns an Unattractive rating based on the market-weighted aggregation of the 443 stocks we cover in the sector. The Amazon (NASDAQ:AMZN) impact and slow growing economy has led to declining profits and even bankruptcy for many companies in the sector. However, a few companies have overcome these struggles and managed to thrive.

By leveraging our Robo-Analyst technology[1] to parse and analyze company filings, including the footnotes and MD&A, we have identified companies with multiple years of after-tax profit (NOPAT) growth and above average returns on invested capital (ROIC)[2]. These companies are also undervalued compared to peers, and our DCF model reveals low expectations for future profit growth baked into the current stock prices.

Below we highlight three standout companies in the Consumer Cyclicals sector: Thor Industries (THO), The TJX Companies (TJX), and AMC Networks (AMCX).

Improving ROIC is Correlated with Creating Shareholder Value

Numerous case studies show that getting ROIC right is an important part of making smart investments. We also know that there is a strong correlation between improving ROIC and increasing shareholder value. Per Figure 1, ROIC explains 75% of the difference in valuation for the 443 Consumer Cyclicals stocks under our coverage. THO, TJX, and AMCX all trade at significant discounts to sector peers as show by their position below the trend line in Figure 1.

Figure 1: Three Undervalued Stocks in the Consumer Cyclicals Sector


Sources: New Constructs, LLC and company filings

Strong Fundamentals and Low Valuation

Besides trading below peers, THO, TJX, and AMCX have grown NOPAT each of the past five years and currently earn an ROIC at or above the Consumer Cyclicals sector average of 13%. Per Figure 2, each of these three stocks also has a lower price-to-economic book value (PEBV) ratio than the sector. A lower PEBV ratio indicates the market expects less profit growth from these three stocks than it does the sector as a whole, despite THO, TJX, and AMCX being more profitable, as measured by ROIC.

Figure 2: 3 Stocks Undervalued Compared to Sector Despite Higher Profitability


Sources: New Constructs, LLC and company filings

Thor Industries (THO)

Thor Industries, a motorized and towable recreational vehicle (RV) manufacturer, was first featured as a Long Idea in June 2016 and subsequently closed in October 2016. Over this time, THO was up 30% while the S&P 500 was up just 2%. Since closing the Long Idea, THOs fundamentals have only strengthened, and a recent drop in valuation makes for an excellent buy the dip moment.

Over the past decade, THOs revenue has grown 10% compounded annually while NOPAT has grown 12% compounded annually, per Figure 3. THOs NOPAT margins, which have improved from 4% in 2007 to 6% over the last twelve months (TTM), have been the key driver of its improving profitability.

Figure 3: THOs Revenue and NOPAT Since 2007


Sources: New Constructs, LLC and company filings

In addition to profit growth, THO has efficiently managed its balance sheet despite acquiring many smaller RV manufacturers over the years. Average invested capital turns, a measure of balance sheet efficiency, have increased from 3.54 in 2012 to 4.48 TTM. Rising margins and efficient capital use have improved THOs ROIC from 14% in 2012 to a top-quintile 25% TTM. The firm has also generated a cumulative $407 million (7% of market cap) in free cash flow since 2012.

Strong Growth Supported by Industry Trends

The recreational vehicle industry has been growing significantly in recent years, with a 12% compounded annual growth rate in unit shipments since 2012. Thor has capitalized on this industry growth and reported record revenue and net income in fiscal 2Q18. Going forward, the Recreation Vehicle Industry Association expects RV shipments will grow to new records in 2018. Thor management also notes that the industry is attracting new buyers at an impressive pace. 34% of RVs sold in 2016 were to new buyers, with 80% of the new buyers under age 65.

Recent Selloff Presents Buying Opportunity

THO is down 34% year-to-date, while the market is up 1%. This underperformance is largely attributable to concerns of President Trumps recent tariff announcement. However, these concerns appear to be overblown. Thor noted in its fiscal 2Q18 call that the tariffs will have less impact on its business than others, as it purchases its steel and aluminum from domestic suppliers. Additionally, the firm noted that it is already working with suppliers to minimize any impact and believes it can pass price increases on to consumers if necessary to maintain strong profit margins.

At its current price of $101/share, THO has a PEBV ratio of 0.9. This ratio means the market expects THOs NOPAT to permanently decline by 10%. This expectation seems rather pessimistic for a firm that has grown NOPAT by 17% compounded annually since 1998 and 25% compounded annually over the past five years.

If THO can maintain current NOPAT margins (6%) and can grow NOPAT by 7% compounded annually over the next decade, the stock is worth $143/share today a 42% upside.

The TJX Companies (TJX)

The TJX Companies, a discount apparel and home fashions retailer, has been able to successfully fend off the growing threat of Amazon and e-commerce. Much like previous Long Idea Ross Stores (NASDAQ:ROST), TJX is able to compete with online offerings by providing deals on apparel and home goods that often cannot be replicated online.

Over the past decade, TJXs revenue has grown 7% compounded annually while its NOPAT has grown 11% compounded annually, per Figure 4. NOPAT growth has been driven by rising margins, which have improved from 5% in 2007 to 8% TTM.

Figure 4: TJXs Revenue and NOPAT Since 2007


Sources: New Constructs, LLC and company filings

In addition to profit growth, TJX has efficiently managed its balance sheet and the capital invested into its business. Average invested capital turns, a measure of balance sheet efficiency, are currently 2.3, which is also the average over the last decade. Rising margins and efficient capital use have improved TJXs ROIC from 12% in 2007 to a top-quintile 17% TTM. The firm has also generated a cumulative $9.6 billion (19% of market cap) in FCF since 2012.

Comparable Store Sales Showcase Strength of Business

In a difficult retail environment, TJX has consistently broken trend. Fiscal 2018 represented the 22nd consecutive year in which comparable store sales increased year-over-year. Comparable store sales growth is a direct result of TJXs value proposition to consumers and the ability of its business model to adapt to consumer demands.

Stock Price Provides Upside Potential

Despite consistent comparable store sales and NOPAT growth, TJX is up just 13% over the past two years while the S&P 500 is up 32%. At its current price of $85/share, TJX has a PEBV ratio of 1.3. This ratio means the market expects TJXs NOPAT to only grow 30% from current levels over the remaining life of the firm. This expectation may seem optimistic for some firms, but not TJX, considering it has grown NOPAT 12% compounded annually for nearly 20 years, or since 1998. While TJXs PEBV is higher than most companies we recommend, the consistent and long-term track record makes these expectations look easily beatable.

If TJX can maintain current margins (8%) and grow NOPAT by 6% compounded annually over the next decade, the stock is worth $97/share today a 14% upside. Add in the 1.6% dividend yield and 22 consecutive years of dividend increases and TJX could be an excellent portfolio addition.

AMC Networks (AMCX)

AMC Networks, a cable television operator and content creator, showcases strong fundamentals in a market where quality content is king. Since 2012, AMCXs revenue has grown 16% compounded annually while its NOPAT has grown 17% compounded annually, per Figure 5. Increased profit growth can be attributed to rising NOPAT margins, which have improved from 17% in 2012 to 18% in 2017.

Figure 5: AMCXs Revenue and NOPAT Since 2012


Sources: New Constructs, LLC and company filings

AMCX currently earns an ROIC of 13%, which is equal to the Consumer Cyclicals sector average. The firm has also generated a cumulative $863 million (28% of market cap) in FCF over the past three years.

Content Creator Can Leverage Existing Content and Could Be a Buyout Target

AMC is best known for creating critically acclaimed series such as Mad Men, Breaking Bad, and The Walking Dead. Many believe the companys success is tied to its most recent hit, The Walking Dead, and that its profits will plummet when that show ends.

However, concerns about The Walking Dead are nothing new. In fact, ratings for The Walking Dead have been in steady decline for the past three seasons, yet AMCX has continued to improve NOPAT. Moving forward, AMC is looking to diversify popular franchises into different revenue streams, such as The Walking Dead video games and merchandising. AMC has also created spin off shows such as Better Call Saul and Fear the Walking Dead to capitalize on the success of its hits.

The company also has deals in place to provide its content through Comcast (and soon YouTube) via AMC Premiere. Additionally, in the battle for content, AMC remains a takeover target. Disney (NYSE:DIS) could immediately boost its own upcoming streaming service, or supplement Hulus offerings, in which it owns a stake. Similarly, Apple (NASDAQ:AAPL) could look to AMCX should its attempt to develop original content not succeed as planned. Beyond streaming assets, a competing cable provider, such as Discovery Communications (NASDAQ:DISCA) could view AMCX as a way to increase its leverage and pricing power with advertisers.

Shares Priced for Significant Cut in Profits

Now, at its current price of $56/share, AMCX has a PEBV ratio of 0.4. This ratio means the market expects AMCXs NOPAT to permanently decline by 60%. Meanwhile, AMCX has grown NOPAT by 17% compounded annually since 2012. Such pessimistic expectations are also at odds with consensus 2018 EPS estimates, which have risen from $6.97/share in December 2017 to $8.13/share in April 2018, which implies 13% EPS growth.

AMCXs current economic book value, which measures the no-growth value of the stock, is $123/share or 119% above the current price. If AMCX can maintain 2017 NOPAT margins (18%) and grow NOPAT by just 3% compounded annually for the next decade, the stock is worth $139/share today a 148% upside.

This article originally published on April 4, 2018.

Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.

[1] Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.

[2] Ernst & Youngs recent white paper, Getting ROIC Right, proves the superiority of our research and analytics.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

5 Retail Stocks Likely to Top Earnings Estimates

The earnings season, which is nearing its end, has been quite impressive this time around. However, the show is not over yet. With several retail behemoths including Walmart, Macy’s and Target, queued up to report their quarterly numbers, investors are likely to keep their eyes on the Retail-Wholesale sector’s progress card.

5 Retail Stocks Likely to Top Earnings EstimatesSource: Shutterstock

We note that the sector has gained 4.7% in a month, outdoing the S&P 500’s 2.1% growth. This can be attributable to a number of micro and macro factors, which have been viewed as positive signals for retailers’ upcoming results.

Retail on Growth Trajectory: Here’s Why

The recent uptick in consumer spending, which accounts for more than two-thirds of economic activity, bodes well. Incidentally, consumer spending inched up 0.4% in March, following 0.2% growth in January while remaining flat in February. This renewed momentum in March emerged from continued rise in income, indicating that consumers may drive economic growth in 2018. In fact, March retail sales advanced 0.6%, bearing testimony to this.

Apart from this, the sector is poised to gain from massive tax cuts and a robust labor market. Notably, the unemployment level that remained stable at 4.1% for six months till March, declined even further to 3.9% in April.

Turning to micro factors, companies in this space are also expected to gain from aggressive omni-channel efforts to keep pace with the changing consumer shopping patterns. To this end, retail players’ solid e-commerce endeavors, compelling pricing strategy, promotional activities, and efforts to strengthen portfolio and enhancing stores experience remain major drivers.

Surely, these strategic investments are eating a portion of margins but retailers are playing smart by undertaking stringent cost-cutting and restructuring activities.

Notably, total earnings of the S&P 500 retailers that have already reported results increased 26.1%, on the back of 14.9% jump in revenues, per the latest Earnings Preview. Well, about half of the retailers in the S&P 500 index released their quarterly outcomes, with 68.4% topping bottom-line estimates and 63.2% delivering positive revenue surprise.

Given the favorable backdrop, the sector is likely to catch investors’ attention. So, picking stocks that are likely to trump estimates can fetch handsome returns. This is because a stock generally picks up steam on earnings beat.

Picking the Prospective Winners for the Season

That said, let’s take a look at some gems in this space that look promising on the earnings front. These stocks carry a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.  Well, our research shows that chances of a positive earnings surprise of stocks with this combination is as high as 70%. Clearly, adding these potential winners is the one of the best investment strategies.

Compare Brokers

5 Retail Stocks Likely to Top Earnings Estimates: Kroger Co (KR)

Kroger Co (NYSE:KR), one of the largest grocery retailers, is a solid bet. The stock carries a Zacks Rank #3 and has an Earnings ESP of +4.99%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at 64 cents per share, reflecting year-over-year growth of 10.3%. Further, this estimate has gone up in the past 30 days.

This Cincinnati, OH-based company delivered an average positive earnings surprise of 2.3% in the trailing four quarters. Its long-term earnings growth rate is 5.9%. The company is slated to report results on Jun 21.

Compare Brokers

5 Retail Stocks Likely to Top Earnings Estimates: Macy’s Inc (M)

Investors can also count on Macy’s Inc (NYSE:M), one of the leading department store retailers in the United States. The company has an Earnings ESP of +4.50% and a Zacks Rank #3.

The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at 40 cents, which shows significant growth from the year-ago period. Also, this estimate has risen 4 cents from 36 cents over the past 30 days.

This Cincinnati, OH-based company has registered positive earnings surprise in the past three quarters and has a long-term earnings growth rate of 8.5%. The company is scheduled to report results on May 16.

Compare Brokers

5 Retail Stocks Likely to Top Earnings Estimates: Dollar General Corp. (DG)

We also suggest investing in Dollar General Corp. (NYSE:DG), one of the largest discount retailers in the United States. The company has a Zacks Rank #2 and an Earnings ESP of +1.38%.

The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at $1.40 per share, reflecting year-over-year growth of 35.9% and an uptrend in the past 30 days.

This Goodlettsville, TN-based company delivered in-line earnings in the last reported quarter, while it topped the consensus mark in the preceding three quarters. The company with a long-term earnings growth rate of 14.6% is expected to report results on Jun 7.

Compare Brokers

5 Retail Stocks Likely to Top Earnings Estimates:

Ross Stores, Inc. (NASDAQ:ROST), an off-price retailer of apparel and home accessories in the United States, also looks promising.

The company carries a Zacks Rank #3 and has an Earnings ESP of +0.94%. The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at $1.06 per share, reflecting year-over-year growth of 29.3%.

Estimates for the quarter have remained stable in the past 30 days. This Pleasanton, CA-based company registered average positive earnings surprise of 6.1% in the trailing four quarters and has a long-term earnings growth rate of 10%. The company is slated to report results on May 24.

Compare Brokers

5 Retail Stocks Likely to Top Earnings Estimates: Urban Outfitters, Inc. (URBN)

Last but not least, Urban Outfitters, Inc. (NASDAQ:URBN) has a Zacks Rank #2 and an Earnings ESP of +1.72%. The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at 30 cents a share, reflecting year-over-year increase of more than 100%.

Notably, the consensus mark also rose a notch from 29 cents in the past 30 days. This Philadelphia, PA-based lifestyle specialty retailer, which offers fashion apparel and accessories, footwear, home décor and gifts products, has registered an average positive earnings surprise of 8.5% in the trailing four quarters.

The company has a long-term earnings growth rate of 12%. It is scheduled to report results on May 22.

More Stock News: This Is Bigger than the iPhone!                   

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don’t buy now, you may kick yourself in 2020.

Click here for the 6 t

5 Retail Stocks Likely to Top Earnings Estimates

The earnings season, which is nearing its end, has been quite impressive this time around. However, the show is not over yet. With several retail behemoths including Walmart, Macy’s and Target, queued up to report their quarterly numbers, investors are likely to keep their eyes on the Retail-Wholesale sector’s progress card.

5 Retail Stocks Likely to Top Earnings EstimatesSource: Shutterstock

We note that the sector has gained 4.7% in a month, outdoing the S&P 500’s 2.1% growth. This can be attributable to a number of micro and macro factors, which have been viewed as positive signals for retailers’ upcoming results.

Retail on Growth Trajectory: Here’s Why

The recent uptick in consumer spending, which accounts for more than two-thirds of economic activity, bodes well. Incidentally, consumer spending inched up 0.4% in March, following 0.2% growth in January while remaining flat in February. This renewed momentum in March emerged from continued rise in income, indicating that consumers may drive economic growth in 2018. In fact, March retail sales advanced 0.6%, bearing testimony to this.

Apart from this, the sector is poised to gain from massive tax cuts and a robust labor market. Notably, the unemployment level that remained stable at 4.1% for six months till March, declined even further to 3.9% in April.

Turning to micro factors, companies in this space are also expected to gain from aggressive omni-channel efforts to keep pace with the changing consumer shopping patterns. To this end, retail players’ solid e-commerce endeavors, compelling pricing strategy, promotional activities, and efforts to strengthen portfolio and enhancing stores experience remain major drivers.

Surely, these strategic investments are eating a portion of margins but retailers are playing smart by undertaking stringent cost-cutting and restructuring activities.

Notably, total earnings of the S&P 500 retailers that have already reported results increased 26.1%, on the back of 14.9% jump in revenues, per the latest Earnings Preview. Well, about half of the retailers in the S&P 500 index released their quarterly outcomes, with 68.4% topping bottom-line estimates and 63.2% delivering positive revenue surprise.

Given the favorable backdrop, the sector is likely to catch investors’ attention. So, picking stocks that are likely to trump estimates can fetch handsome returns. This is because a stock generally picks up steam on earnings beat.

Picking the Prospective Winners for the Season

That said, let’s take a look at some gems in this space that look promising on the earnings front. These stocks carry a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.  Well, our research shows that chances of a positive earnings surprise of stocks with this combination is as high as 70%. Clearly, adding these potential winners is the one of the best investment strategies.

Compare Brokers

5 Retail Stocks Likely to Top Earnings Estimates: Kroger Co (KR)

Kroger Co (NYSE:KR), one of the largest grocery retailers, is a solid bet. The stock carries a Zacks Rank #3 and has an Earnings ESP of +4.99%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at 64 cents per share, reflecting year-over-year growth of 10.3%. Further, this estimate has gone up in the past 30 days.

This Cincinnati, OH-based company delivered an average positive earnings surprise of 2.3% in the trailing four quarters. Its long-term earnings growth rate is 5.9%. The company is slated to report results on Jun 21.

Compare Brokers

5 Retail Stocks Likely to Top Earnings Estimates: Macy’s Inc (M)

Investors can also count on Macy’s Inc (NYSE:M), one of the leading department store retailers in the United States. The company has an Earnings ESP of +4.50% and a Zacks Rank #3.

The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at 40 cents, which shows significant growth from the year-ago period. Also, this estimate has risen 4 cents from 36 cents over the past 30 days.

This Cincinnati, OH-based company has registered positive earnings surprise in the past three quarters and has a long-term earnings growth rate of 8.5%. The company is scheduled to report results on May 16.

Compare Brokers

5 Retail Stocks Likely to Top Earnings Estimates: Dollar General Corp. (DG)

We also suggest investing in Dollar General Corp. (NYSE:DG), one of the largest discount retailers in the United States. The company has a Zacks Rank #2 and an Earnings ESP of +1.38%.

The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at $1.40 per share, reflecting year-over-year growth of 35.9% and an uptrend in the past 30 days.

This Goodlettsville, TN-based company delivered in-line earnings in the last reported quarter, while it topped the consensus mark in the preceding three quarters. The company with a long-term earnings growth rate of 14.6% is expected to report results on Jun 7.

Compare Brokers

5 Retail Stocks Likely to Top Earnings Estimates:

Ross Stores, Inc. (NASDAQ:ROST), an off-price retailer of apparel and home accessories in the United States, also looks promising.

The company carries a Zacks Rank #3 and has an Earnings ESP of +0.94%. The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at $1.06 per share, reflecting year-over-year growth of 29.3%.

Estimates for the quarter have remained stable in the past 30 days. This Pleasanton, CA-based company registered average positive earnings surprise of 6.1% in the trailing four quarters and has a long-term earnings growth rate of 10%. The company is slated to report results on May 24.

Compare Brokers

5 Retail Stocks Likely to Top Earnings Estimates: Urban Outfitters, Inc. (URBN)

Last but not least, Urban Outfitters, Inc. (NASDAQ:URBN) has a Zacks Rank #2 and an Earnings ESP of +1.72%. The Zacks Consensus Estimate for first-quarter fiscal 2018 is pegged at 30 cents a share, reflecting year-over-year increase of more than 100%.

Notably, the consensus mark also rose a notch from 29 cents in the past 30 days. This Philadelphia, PA-based lifestyle specialty retailer, which offers fashion apparel and accessories, footwear, home décor and gifts products, has registered an average positive earnings surprise of 8.5% in the trailing four quarters.

The company has a long-term earnings growth rate of 12%. It is scheduled to report results on May 22.

More Stock News: This Is Bigger than the iPhone!                   

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don’t buy now, you may kick yourself in 2020.

Click here for the 6 t