Back to top

Image: Bigstock

Retail ETFs in Focus Ahead of Big-Box Q2 Earnings

Read MoreHide Full Article

The retail sector is in focus with the earnings releases of big retailers like Wal-Mart (WMT), Home Depot (HD), Lowe’s (LOW) and Target (TGT), as well as store channels like Nordstrom (JWN) and Kohl’s (KSS) coming up. 

So far, 23 out of 36 retailers on the S&P 500 Index have already reported. Earnings of these companies are up 26.2% from the same period last year on 6.1% higher revenues, with 52.2% beating EPS estimates and 34.8% beating revenue estimates. Overall, the retail sector is expected to report earnings growth of 26.5% on 6.1% revenue growth. 

Given this, traditional retail ETFs are in focus. SPDR S&P Retail ETF (XRT - Free Report) and VanEck Vectors Retail ETF (RTH - Free Report) have shed a modest 0.5% and 2.1%, respectively, over the past three months.

What Our Model Unveils for Retailer Earnings

According to our methodology, 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter

Wal-Mart has an Earnings ESP of -0.93% and a Zacks Rank #2. The company saw no earnings estimate revision over the past 30 days for the to-be-reported quarter. Wal-Mart delivered an average four-quarter earnings surprise of 8.34%. Wal-Mart is scheduled to report on Aug 15, before market open (see: all the Consumer Discretionary ETFs here).

Home Depot has an Earnings ESP of -0.94% and a Zacks Rank #3. The company saw a negative earnings estimate revision of 4 cents over the past seven days for the to-be-reported quarter. It delivered an average earnings surprise of 1.99% in the last four quarters. Home Depot is scheduled to report on Aug 13, before market open.

Target has an Earnings ESP of +0.37% and a Zacks Rank #3. The company saw a positive earnings estimate revision of a penny over the past month for the to-be-reported quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The company delivered an earnings surprise of 22.43% for the last four quarters. Target will report earnings on Aug 21 before the opening bell (read: 4 ETF Areas & Stocks to Win on June Retail Sales). 
    
Lowe’s has an Earnings ESP of -0.44% and a Zacks Rank #4 (Sell). The company saw a negative earnings estimate revision of a couple of cents for the to-be-reported quarter in the past seven days and delivered an earnings surprise of 2.83%, on average, in the last four quarters. LOW is slated to report earnings on Aug 20. 

Nordstrom has an Earnings ESP of -7.69% and a Zacks Rank #3. It saw a positive earnings estimate revision of a penny for the to-be-reported quarter in the past seven days. The company delivered a negative earnings surprise of 3.59%, on average, over the past four quarters. It is scheduled to report earnings on Aug 27 after the closing bell. 

Kohl’s has an Earnings ESP of +21.65% and a Zacks Rank #5 (Strong Sell). It saw a negative earnings estimate revision of 6 cents for the to-be-reported quarter in the past seven days. Kohl’s delivered a negative average earnings surprise of 123.19% in the last four quarters. The company is slated to report before the opening bell on Aug 28.

ETFs in Focus

SPDR S&P Retail ETF (XRT - Free Report)

SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large-, mid- and small-cap stocks. It holds 77 well-diversified stocks in its basket, with none making up for more than a 2% share. Additionally, SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in automotive retail, apparel retail, specialty retail, and broad-line.

SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $457.6 million and an average trading volume of 5 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

VanEck Vectors Retail ETF (RTH - Free Report)

VanEck Vectors Retail ETF provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. VanEck Vectors Retail ETF is highly concentrated on the top firm with more than 18% exposure, while the other firms hold no more than 9.5% share (read: Amazon's Weak Sales Spoil Investors' Mood: ETFs in Focus). 

VanEck Vectors Retail ETF has amassed $200.3 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 4,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #2 with a Medium risk outlook.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


SPDR S&P Retail ETF (XRT) - free report >>

VanEck Retail ETF (RTH) - free report >>

Published in