Dow Jones Rallies 0.7% as Walmart, Home Depot Earning Lift Retail Sector

Key Points

  • Wall Street was mixed on Tuesday, with the Dow gaining, Nasdaq 100 falling and S&P 500 remains broadly flat.
  • Retail stocks got a lift from much better-than-expected earnings Walmart and Home Depot.
  • Big tech/growth names fell on a rise in US bond yields.

Wall Street Mixed as Retailers Rally on Strong Earnings, Growth Stocks Fall Amid Yield Rally

US equity markets were mixed on Tuesday, as strong earnings from heavyweight retailers and better-than-expected US Industrial Production growth in July lifted stocks that are sensitive to perceptions about the health of the US economy, but a subsequent rise in US bond yields hit rate-sensitive big tech/growth names. The end result was that the Nasdaq 100 index was last down about 0.3%, after hitting fresh multi-month highs above 13,700 earlier in the session, but the Dow Jones was last up about 0.7%, after hitting its highest levels since mid-April in the 34,200s.

The S&P 500 index was last changing hands close to flat on the day near the 4,300, after also hitting its highest levels since mid-April at 4,325 earlier in the session, before finding resistance at its 200-Day Moving Average at 4,326. The last time the benchmark US index hit its 200DMA was back on 21 April and, at current levels, the S&P 500 is trading around 18% higher versus its annual lows in the 3,600s posted back in June.

Earnings that have held up better than expected, as most recent demonstrated by Walmart and Home Depot, evidence that the US is holding up better than expected in the face of extreme price pressures and evidence that this year’s inflation surge has peaked and should now ease have all contributed to the recent run higher. In short, optimism has grown that the US economy might be able to achieve a so-called soft-landing, where the Fed is able to bring inflation back under control without having to raise interest rates excessively high and risking a recession.

Walmart Jumps 5.5%, Home Depot Leaps 4.1%

The share prices of two of the largest US retailers, Walmart and Home Depot, both jumped on Tuesday after both posted better-than-expected earnings results prior to the open of US trade. Walmart’s downwards revision to its new full-year profit forecast wasn’t as bad as expected, with the company having issued a profit warning only a few weeks ago. Meanwhile, Home Depot beat top-line earnings estimates despite falling store footfall amid higher prices.

Walmart and Home Depot’s solid earnings helped the likes of Lowe’s, Target and TJX Companies and Kroger all also post solid intra-day gains. That helped to lift the S&P 500 GICS Consumer Staples and Consumer Discretionary sectors, which were the best performers after gaining 1.2% and 0.9% respectively. The underperforming sectors were Information Technology (-0.6%), Communication Services (-0.3%), Health Care (-0.4%), Energy (-0.4%) and Real Estate (-0.5%).

In terms of some of the big names, Microsoft, Alphabet and Apple were down 0.5%, while Tesla dropped closer to 1.0%. Amazon nearly gained 1.0%, lifted amid the upbeat tone to the retail sector.

Walmart And Home Depot In Spotlight After Strong Reports

Key Insights

  • Walmart and Home Depot easily beat analyst estimates. 
  • Walmart enjoys strong support in premarket trading. 
  • Retailers’ earnings will be the key driver for the market today. 

S&P 500 futures rebounded closer to the positive territory in premarket trading after the release of better-than-expected reports from Walmart and Home Depot. Traders will pay close attention to the dynamics of these stocks during today’s trading session as strong demand for retailers’ shares may push the market to new highs.

Walmart Easily Beats Analyst Estimates

Walmart reported revenue of $152.6 billion and adjusted earnings of $1.77 per share, beating analyst estimates on both earnings and revenue. U.S. comparable sales increased by 6.5%, highlighting strong demand.

In the third fiscal quarter, Walmart expects to report consolidated net sales growth of about 5%, which will be negatively affected by $1.3 billion from currency fluctuations. Adjusted earnings per share are expected to decline by 9.0 – 11.0%.

The retailer noted that its actions to improve inventory levels in the U.S. put pressure on profit margin in the second fiscal quarter and the outlook for the full fiscal year.

The market was skeptical about Walmart’s performance ahead of earnings results, so the stock got a major boost after the release of the report. Currently, Walmart is up by more than 4% in premarket trading.

Home Depot Reaffirms Guidance For Fiscal Year 2022

Home Depot reported revenue of $43.79 billion and GAAP earnings of $5.05 per share, beating analyst estimates on both earnings and revenue. The retailer noted that comparable sales in the U.S. increased by 5.8% in the second fiscal quarter.

The company reaffirmed its guidance for fiscal 2022. Home Depot expects that comparable sales will grow by 3.0%, while diluted earnings per share will grow in the mid-single digits.

Home Depot is currently down by more than 1% in premarket trading, and it remains to be seen whether the strong report will be sufficient enough to push the stock to higher levels.

Traders’ Reaction To Key Earnings Reports Will Be The Key Driver For S&P 500 Today

S&P 500 enjoyed a strong rally from June lows. Technically, the market is overbought. In this environment, stocks will need significant positive catalysts to continue the rally without a material pullback.

The reaction to retailers’ earnings will show whether traders are ready to buy big names at current levels. Walmart and Home Depot are not cheap after the recent rebound, so their reports will be a great test for traders’ risk appetite.

For a look at all of today’s economic events, check out our economic calendar.

Best Oversold Stocks to Buy Now for June 2022

When this happens, it can pull in even the best stocks. That means the bad, unprofitable stocks and the best-in-breed stocks are sold off. And that’s bargain time for long-term investors.

Markets and Big Money in the Last Six Months

When trying to make sense of this market, I like to look to data. So, what does the data say?

Well, my research firm, MAPsignals, follows the Big Money because we believe it moves markets. We created the Big Money Index (BMI), a 25-day moving average of Big Money buys and sells. It recently hit oversold levels (below the green line), meaning selling is driving down markets big time:

Chart, histogram Description automatically generated

Oversold territory doesn’t occur often. But when it has in the past, it’s almost always been a bullish indicator. Look at what’s happened after the BMI hit oversold since 2014:

Since 1990, the BMI has been oversold 21 times. It tends to stay oversold for three weeks, with markets troughing two weeks later, on average. Since 1990, the forward-looking returns on the S&P 500 after hitting oversold are 16% after one year and 29% after two years.

This puts us on the lookout for quality stocks that will rise as buyers return and markets trend upward again. We want fundamentally sound companies with good histories and discounted prices. Here are our best oversold stocks to buy now for June 2022: ODFL, MA, HD, LRCX, and NKE.

Old Dominion Freight Line, Inc. (ODFL) Analysis

Up first is Old Dominion, which is one of the largest North American cargo carriers.

Even though great companies’ stocks can be volatile, like ODFL over the past year, they’re worthy of attention, especially on pullbacks. Check out Old Dominion:

  • Year-to-date month performance (-31.0%)
  • Recent Big Money sell signals

To show you what our Big Money signals look like on a stock, have a look at all the buys and sells in ODFL over the past year:

Looking more broadly, Old Dominion has been a high-quality stock for years. The blue bars in the chart below show when ODFL was a high-ranking stock likely being bought by a Big Money player, according to MAPsignals. When you see a lot of blue, it can be very bullish:

Those blue signals indicate Big Money buying and solid fundamentals. As you can see, Old Dominion’s sales and earnings growth have been strong, making it worthy of attention:

  • 1-year sales growth rate (+30.9%)
  • 3-year EPS growth rate (+24.0%)

Mastercard Incorporated (MA) Analysis

Next up is Mastercard, the global payments and credit card giant.

Check out these technicals for MA:

  • Year-to-date performance (-5.0%)
  • Recent Big Money sell signals

It’s been getting bought and sold, as trading has been choppy over the past year:

Now let’s look long-term. Below are the top buy signals for Mastercard since 2006. The Big Money has been on it for a while:

Let’s look under the hood. As you can see, Mastercard has grown sales well and the outlook for future earnings looks good:

  • 1-year sales growth rate (+23.4%)
  • 2-year vs. 1-year EPS growth estimate (+20.5%)

Home Depot, Inc. (HD) Analysis

Another growth name is Home Depot, the world’s largest home improvement retailer.

Strong candidates for growth usually have Big Money buying the shares. Home Depot has historically had that. Until December 2021, it was a darling. But recently it’s seen big selling, which could be an opportunity:

  • Year-to-date performance (-31.0%)
  • Historical Big Money signals

Below are the blue Top 20 Big Money signals HD has made since 1990. It’s clearly a Big Money favorite. That’s the JUICE!

Now let’s dig deeper. Sales growth for Home Depot has been impressive. I expect more of the same in the coming years. Its profit margin and minimal debt also bode well for the future. HD also pays a current dividend of nearly 2.7%.

  • 1-year sales growth rate (+14.4%)
  • Profit margin (+10.9%)
  • Debt/equity ratio (0.0%)

Lam Research Corporation (LRCX) Analysis

Number four on the list is Lam Research, which is a top supplier of processing equipment for the semiconductor industry.

Here are the technicals important to me:

  • Year-to-date performance (-35.0%)
  • Historical Big Money signals

Except for a semi-sustained rise late last year, LRCX has seen more Big Money selling than buying:

But Lam Research is a Big Money favorite, and it pays a current dividend of more than 1.2%. Below are the Big Money Top 20 buy signals for LRCX since 2014:

Let’s look under the hood. Despite the price slide, Lam Research sales have jumped quite a bit, and earnings are expected to keep growing:

  • 1-year sales growth rate (+45.7%)
  • 2-year vs. 1-year EPS growth rate estimate (+20.6%)

NIKE, Inc. (NKE) Analysis

Our last growth candidate is NIKE, the gigantic shoe and athletic wear company. Last summer it was being bought up, but since then there’s been lots of Big Money selling as discretionary stocks have been pinched due to recession fears:

Check out these technicals:

  • 1-month performance (-16.9%)
  • Historical Big Money signals

But NKE is a high-quality stock since it’s made the MAPsignals Top 20 report. As you can see below, it’s been a Big Money favorite for years. Right now, it’s on a pullback and could be an opportunity:

Now let’s look below the surface a bit. Sales have been growing and the earnings outlook is solid:

  • 1-year sales growth rate (+18.9%)
  • 2-year vs. 1-year EPS growth estimate (+23.1%)

Bottom Line and Explanatory Video

 

ODFL, MA, HD, LRCX, and NKE represent the top oversold stocks for June 2022. They’ve been sold a lot lately…perhaps too much. Strong, fundamentally-sound stocks seeing near-term sell signals are worthy of extra attention because of their long-term potential.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in HD, LRCX, and NKE in personal and managed accounts.

Contact

https://mapsignals.com/contact/

Stock Bulls Remain Optimistic As Data Indicates a Slowdown in Manufacturing Inflation

Stock bulls remain extremely cautious but a bit more optimistic as data indicates a slowdown in manufacturing inflation. The Producer Price Index rose +11% year-over-year in April, higher than expected but a meaningful pullback from March’s +11.5%. Producer prices lead consumer prices, so the report is a good sign overall, though investors, as well as the Fed, will need to see a couple more months of declines before declaring that inflation is indeed cooling.

Inflation

Economists also warn that goods inflation may be coming down because consumer demand is shifting more to services, meaning high prices could simply be moving from one part of the economy to another. The latest data shows services prices are rising at the fastest rate in three decades with airfare leading the way. Even if inflation has peaked, the question now is, how long will it remain elevated?

Federal Reserve Chair Jerome Powell cautioned yesterday that he can’t guarantee the central bank can deliver a so-called “soft landing” for the economy, pointing to the tight labor market and ongoing supply chain dislocations. Powell also stressed that other “huge events” are playing important roles right now, including Russia’s war in Ukraine, that are beyond the Fed’s control. Powell made the comments after being confirmed by the Senate for a second 4-year term.

The central bank’s target inflation rate is still a “flexible +2%” but several officials have indicated that the new normal might be more in the +2.5% to +3% range. One of the main gauges (but not the only one) the Fed uses to determine the rate of inflation is the Core PCE Prices Index, which for March was running at +5.2%. The April read is due out on May 27, which is a couple weeks ahead of the Fed’s next meeting on June 14-15.

Data to watch

Consumer data recently has been sending mixed signals that are hard to interpret. Sentiment has been mostly falling since the start of the year but consumer spending has not shown any signs of pullback.

Next week, investors get an update on how spending is holding up via April Retail Sales on Tuesday. A slew of fresh housing data next week will provide a deeper look at how substantially higher mortgage rates might be impacting the market. The NAHB Housing Market Index for May is out on Tuesday, followed by April Housing Starts on Wednesday, and April Existing Home Sales on Thursday.

Several key earnings are on the calendar next week as well, including Home Depot and Walmart on Tuesday; Cisco, Lowe’s, Target, and TJX Companies on Wednesday; Applied Materials, Palo Alto Networks, and Ross Stores on Thursday; and Deere & Co. on Friday.

Best Retail Stocks To Buy Now

Key Insights

  • Investors are searching for safe-haven assets, and retail stocks may benefit from this trend. 
  • Some retail stocks, like Walmart and Dollar Tree, have already shown strong performance at the start of this year. 
  • Other retail stocks, like Home Depot, have suffered a pullback and returned to cheaper valuation levels. 

S&P 500 gained strong downside momentum in the recent trading sessions as the market reacted to hawkish comments from the Fed. Not surprisingly, investors are searching for safe-haven assets in the rising interest rate environment, and retail stocks have a good chance to benefit from this trend.

Walmart

Shares of Walmart had a strong start of this year and are up by about 10% year-to-date. Analyst estimates have improved in recent months, and the company is expected to report earnings of $6.76 per share in the current fiscal year.

In the next fiscal year, Walmart is projected to report earnings of $7.28 per share, so the stock is trading at 22 forward P/E. This is not cheap for a retailer, but investors are willing to pay a premium as the company has reported strong performance in recent quarters.

Dollar Tree

Dollar Tree developed strong upside momentum in 2022, but the stock is still valued at less than 19 forward P/E.

Shares of Dollar Tree have clearly benefited from the rush into potential safe-haven assets amid high inflation and rising yields, and they have a good chance to continue the current upside trend.

Home Depot

Unlike Walmart and Dollar Tree, shares of Home Depot had a challenging start of this year. Currently, Home Depot is down by more than 25% year-to-date.

Analyst estimates have moved a bit lower in recent months. The company is expected to report earnings of $16.1 per share in the current year and earnings of $17.31 per share in the next year, so the stock is trading at less than 18 forward P/E.

At such levels, the stock may attract more traders who are willing to initiate positions in this market segment.

For a look at all of today’s economic events, check out our economic calendar.

Lowe’s Shares Rise After Earnings Blow Past Estimates and Company Lifts Outlook

Shares of the home improvement retailer Lowe’s rose over 3% on Wednesday after the company reported better-than-expected earnings in the holiday quarter and lifted annual sales and profit outlook.

The Mooresville, North Carolina-based retailer reported quarterly adjusted earnings of $1.78​​ per share, beating the Wall Street consensus estimates of $1.71 per share.

The company that distributes building materials and supplies through stores in the United States said its revenue jumped over 5.0% to $21.34 billion from a year earlier. That too topped the market expectations of $20.90 billion.

Lowe’s expects to reach $97 billion to $99 billion in sales for its fiscal 2022, up from a previous forecast of $94 billion to $97 billion. Earnings per share are expected to increase from $12.25 to $13 in the company’s last forecast to $13.10 to $13.60 this year.

Lowe’s beat consensus estimates on comps, gross margins and operating margins, as well as EPS. This compares to HD’s print yesterday which was better on comps but not as strong on gross margins. And, after giving initial 2022 guidance just two months ago, Lowe’s (LOW) raised their outlook next year to above consensus levels, which we were not expecting,” noted Michael Baker,  Senior Research Analyst at D.A. Davidson.

“Our key theme of a company-specific improvement played out this quarter, driven by LOW’s ability to close the gap with HD both on pro penetration and operating margins. And, like HD, Lowe’s 4Q comp was better than 3Q for the 10th of the last 13th years.”

Lowe’s stock traded 3.25% higher at $221.53. The stock fell over 14% so far this year after surging over 61% in 2021.

Analyst Comments

“With home center EPS now wrapped up, we’re incrementally confident that the sector remains attractive for investment. Lowe’s (LOW) 2-yr comp seq. accelerated (like HD) despite stimulus headwinds, and MTD sales reveal a sustained trend. We forecast sales above the guidance midpoint, believing an aged housing stock, refined DIY skillsets, and pricing can slightly outweigh rising rates and wallet share rotation toward services for positive dollar growth,” noted Jonathan Matuszewski, equity analyst at Jefferies.

Lowe’s Stock Price Forecast

Fourteen analysts who offered stock ratings for Lowe’s in the last three months forecast the average price in 12 months of $287.46 with a high forecast of $300.00 and a low forecast of $275.00.

The average price target represents a 30.24% change from the last price of $220.72. Of those 14 analysts, 13 rated “Buy”, one rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $280 with a high of $365 under a bull scenario and $190 under the worst-case scenario. The investment bank gave an ” Overweight ” rating on the home improvement retailer’s stock.

“Strong results and guide, could be a momentum shifter in terms of sentiment. 13% EBIT margins in sight, albeit with an extra week. Margin expansion, underpinned by improving GM’s should be rewarded. OW, $280 PT,” noted Simeon Gutman, equity analyst at Morgan Stanley.

Several analysts have also updated their stock outlook. Citigroup raised the price target to $292 from $270. Truist Securities lifted the price objective to $293 from $284. Evercore ISI cut the target price to $270 from $280.

Technical analysis suggests it is good to hold as 100-day Moving Average and 100-200-day MACD Oscillator gives a mixed signal.

Check out FX Empire’s earnings calendar

Home Depot Could Sell Off to 300

Dow component Home Depot Inc. (HD) is trading higher by less than 1% after beating Q4 2021 top and bottom line estimates. The home improvement giant posted a profit of $3.21 per-share, topping expectations by $0.03, while revenue rose 19.7% year-over-year to $35.72 billion, more than $800 million higher than consensus. Reaction to the results and a dividend increase were muted after fiscal 2022 guidance showed little change over 2021.

Growth Reverting to 2019 Levels

The company is lapping historic growth booked during the early stages of the pandemic, making quarterly metrics less attractive to new investors. However, the drop off in demand has been less than expected so far, with continued growth fueled by a strong US economy and near record sales of new and existing homes. Even so, the stock has grown expensive at a lofty 23.19 price-to-earnings (P/R) ratio, much higher than rival Lowes Corp.’s (LOW) 19.42 P/E.

Gross margins are also falling due to rising inflation, dropping from 22.0% one year ago to 9.7% in the third quarter. Home Depot didn’t discuss margin in the pre-market release but should clarify during the 9:00am conference call. Lumber prices, in particular, will impact profitability going forward, with the relentless rise since August adding to Q4 results. On the flip side, margin-killing transportation costs and supply chain issues are likely to persist into 2023.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 19 ‘Buy’, 5 ‘Overweight’, 9 ‘Hold’, 0 ‘Underweight’, and 1 ’Sell’ recommendation. Price targets currently range from a low of $310 to a Street-high $470 while the stock is set to open Tuesday’s session less than $40 above the low target. This humble placement makes sense in the wake of superior 2020 and 2021 returns that have generated long-term overbought technical conditions.

Home Depot broke out above the February 2020 peak at 247.36 in May, entering an uptrend that stalled at 293 in August. The stock cleared that barrier in March 2021, gaining ground in two buying waves that ended at 420.61 in December.  The subsequent decline completed a double top breakdown in January, signaling a correction that reached 200-day moving average support on Jan. 20. It’s been testing that level for the last month, with the post-news uptick too weak to declare victory for the bulls.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Best Stocks, Crypto, and ETFs to Watch – Coinbase, Home Depot, Cardano in Focus

Coinbase Global Inc. (COIN) reports Q4 2021 earnings after Thursday’s closing bell, with an expected profit of $2.16 per-share on $1.98 billion in revenue. The stock came public at 381 in April 2021 and topped out, ahead of a decline that broke 8-month support at 215 in January. It’s now trading just 30 points above the all-time low at 162.20, ahead of a Biden executive order that lays the groundwork for a government-wide strategy to regulate digital assets. A sell-the-news reaction is likely throughout the crypto universe.

Home Depot Inc. (HD) reports Q4 2021 results on Tuesday, with analysts looking for a profit of $3.18 per-share on $34.85 billion in revenue. If met, earnings-per-share (EPS) will mark a 20% increase compared to the same quarter last year. The stock hit an all-time high at 420.61 in December and sold off, entering a correction that’s now relinquished 16% year-to-date. Price action has been testing 200-day moving average support for the last month, raising the stake ahead of this week’s confessional.

Virgin Galactic Inc. (SPCE) fell apart in October after delaying the first tourist space flight by one year, citing design issues. The decline pierced May support in the mid-teens in December, ahead of continued downside that ended within 70 cents of 2019’s all-time low in January. Ticket sales for the general public went on sale last week, triggering a round of excitement, followed by a deep fade. The stock could take another shot at higher ground after this week’s Q4 2021 release.

Cardano (ADA) has dropped 68% since posting an all-time high at $3.10 in September, undercutting par ($1.00) for the first time in 9 months. This is a critical price level, generating multiple 2021 recovery waves. It tagged support for the first time since July in January, yielding an uptick that booked little upside before sellers in force returned two weeks ago. The crypto hit an all-time low at $0.9146 over the holiday, raising odds that support has now become resistance.

iShares MSCI Emerging Markets Index Fund (EEM) has struggled since February 2021, dropping more than 15%. The selloff has tracked a declining channel, with resistance aligned at the 200-day moving average. The monthly Stochastic oscillator has just crossed into the first buy cycle since 2018, at the same time that Omicron is rapidly receding from the population. This harmonic convergence could signal a strong rally, potentially lifting the fund to an all-time high.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held Virgin Galactic in a family account at the time of publication. 

Wall Street Week Ahead Earnings: Caesars Entertainment, Home Depot, Lowe’s and Moderna in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 21

Monday (February 21)

The New York Stock Exchange and NASDAQ will all be closed on Monday, February 21 for President’s Day.

Tuesday (February 22)

IN THE SPOTLIGHT: CAESARS ENTERTAINMENT, HOME DEPOT

CAESARS: The largest casino-entertainment Company in the U.S. company is expected to report its fourth-quarter loss of $-0.71 per share, up over 58%, better compared to a loss of $-1.7 per share seen in the same period a year ago. The Las Vegas-based company would post revenue growth of over 77% to $2.58 billion.

Caesars Entertainment (CZR) is currently trading at below its historical NTM multiple on 2023e EBITDAR, despite our expectation of >1,000bps higher core casino margins and faster growth. We believe regional casino markets (55% of mix) have structural tailwinds from customers acquired post-COVID and sports betting legalization,” noted Thomas Allen, equity analyst at Morgan Stanley.

“We expect CZR to improve its sports betting / iGaming market share in coming qtrs, a key driver to Gaming stocks in recent years. High leverage now (7.5x at YE21) but significant FCF and a planned Vegas asset should drive leverage to ~5x by YE22, opening up a broader investor base.”

HOME DEPOT: The largest home improvement retailer in the United States is expected to report its fourth-quarter earnings of $3.22 per share, which represents year-over-year growth of over 17% from $2.74 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of over 7% to $34.6 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“We are Overweight Home Depot (HD) given its best-in-class nature and structural housing tailwinds beyond N-T disruption from COVID-19. The stock seems attractively valued in the context of a potential 2021/2022 economic/housing boom,” noted Simeon Gutman, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 22

TICKER COMPANY EPS FORECAST
CNP CenterPoint Energy $0.33
HR Healthcare Realty Trust $0.44
HD Home Depot $3.22
M Macy’s $1.91
MDT Medtronic $1.38
PANW Palo Alto Networks $-0.42
TOL Toll Brothers $1.26

 

Wednesday (February 23)

IN THE SPOTLIGHT: LOWE’S

Home improvement retailer Lowe’s is expected to report its fourth-quarter earnings of $1.69 per share, which represents year-over-year growth of over 27% from $1.33 per share seen in the same period a year ago. The company that distributes building materials and supplies through stores in the United States would post revenue growth of over 2% to $20.82 billion.

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience. Combined with productivity initiatives, this should enable EBIT margin expansion going forward.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 23

TICKER COMPANY EPS FORECAST
BBWI Bath & Body Works $2.25
BCS Barclays $0.29
EBAY eBay $0.82
HEI Heico $0.57
NTAP NetApp $1.07

 

Thursday (February 24)

IN THE SPOTLIGHT: MODERNA

Moderna, the biotech company focused on drug discovery, is expected to report its fourth-quarter earnings of $8.62 per share, which represents year-over-year growth of over 1,340% from a loss of -$0.69 per share seen in the same period a year ago.

The Massachusetts-based biotechnology company would post revenue growth of 1,075% to around $6.71 billion.

“We are Equal-weight Moderna. While we believe there is long-term upside for Moderna, we believe the significant valuation increase associated with the success of the COVID-19 vaccine limits the near-term upside,” noted Matthew Harrison, equity analyst at Morgan Stanley.

“The company has taken an industrialized approach to developing mRNA based therapeutics and has rapidly generated a broad pipeline of 21 programs, 11 of which have entered clinical development. We believe Moderna’s mRNA drug development platform is more diversified and scalable compared with competitors, and is validated through broad partnerships with Merck and AstraZeneca. We see vaccines and rare diseases as the key valuation drivers of the company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 24

TICKER COMPANY EPS FORECAST
ADSK Autodesk $0.89
AXON Axon Enterprise $-0.07
SQ Block $-0.06
CVNA Carvana $-0.76
DELL Dell Technologies $1.94
DISCA Discovery $0.84
GCI Gannett $-0.03
NTES NetEase $0.82
NKLA Nikola $-0.46
VMW VMware $1.44
ZS Zscaler $-0.57

 

Friday (February 25)

TICKER COMPANY EPS FORECAST
AES AES Corp. $0.46
CNK Cinemark Holdings $-0.16
DSX Diana Shipping $0.30
SSP E.W. Scripps $0.46
FL Foot Locker $1.46

 

Best ETFs For December 2021

Some huge sell days took place last month. But as you’ll see in the Big Money ETF Buys and Sells chart below, troughs tend to appear after huge sell days (like we just experienced). In other words, December has a bullish setup.

Going to MAPsignals.com, we can scan Big Money ETF Buys and Sells. Recent big selling (red bars) led markets lower as there was no huge buying (blue bars). We’ve seen a few big sell days this year. Notice what tends to happen after them? Blue bars.

Source: www.mapsignals.com

Long-term investors should look for ETFs (and their stocks), with great setups for the months ahead.

Remember: ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all strongest to weakest.

Let’s get to the 5 best ETF opportunities for December.

#1 Consumer Discretionary Select Sector SPDR Fund (XLY)

Consumer discretionary stocks have had a good year overall. Big Money has been buying XLY in chunks this year, especially lately. The fresh buy signals are possibly a play to capitalize on the mega-cap stocks in retail, home improvement, & more:

XLY holds solid stocks; one example is The Home Depot, Inc. (HD). Here are Big Money signals for HD:

#2 iShares MSCI USA Quality Factor ETF (QUAL)

As the name implies, this ETF is all about quality. With stocks, that means profitable, growing companies – the cream of the crop – and that’s what QUAL holds. There was a big washout around October (red bars), but look closely and you’ll see how big dips have preceded big rises:

One great stock QUAL holds is NIKE, Inc. Class B (NKE). It’s a long-time Big Money favorite with awesome fundamentals. As the multi-year chart below shows, when red appears on great stocks, it’s usually an opportunity to get quality on sale:

#3 iShares MSCI USA Momentum Factor ETF (MTUM)

The MTUM is a momentum-based ETF that holds a wide range of high-flying stocks (but they’re also subject to downward pressure). It’s been a solid performer all year, especially early on and then again in the latter part of 2021:

One big winner within MTUM is Tesla, Inc. (TSLA). It’s an outlier stock:

#4 iShares Russell 1000 ETF (IWB)

The first three ETFs were from the stronger part of my ranked list. Now we look for bargains by identifying weaker ETFs holding stocks with strong fundamentals. IWB holds large- and mid-cap U.S. stocks, which have driven markets upward for a while now. After recent highs, IWB has pulled back some, which could be an opportunity:

This ETF holds great stocks. One such winner is Microsoft Corporation (MSFT). Big Money loves it. The multi-year chart says don’t bet against it:

#5 iShares Core S&P Small Cap ETF (IJR)

We have a new MAPsignals author on the team, Alec Young. He brought IJR to our attention as it tracks the S&P 600, a cap-weighted index of U.S. small-cap equities. Such stocks are looking to grow. So, within an ETF like IJR, some new outliers could be flying under the radar. IJR has pulled back recently, but has strong potential over the long-term:

A great stock in IJR is Innovative Industrial Properties Inc (IIPR). It has the potential to be an outlier. Big Money has shown interest in IIPR because of its solid fundamentals, which helps make me a believer that it could thrive (as it has since Big Money dove in):

Here’s a Big Money recap:

  • When Big Money buying pours in, stocks tend to go up
  • Red selling on great quality can be a great opportunity
  • Repeated buying usually means outsized gains

Let’s summarize here:

XLY and QUAL rank high. MTUM, IWB, and IJR, however, rank lower on our list, due to weaker technicals. That’s why I think these weaker ETFs represent great potential bargains.

The Bottom Line

XLY, QUAL, MTUM, IWB, and IJR are my top ETFs for December 2021. November proved to be a dud relative to its usual performance. But 2021 can still end strong. Many ETFs and stocks have pulled back, especially recently, creating potentially attractive opportunities. There’s still a lot to like long-term.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in XLY, QUAL, MTUM, IWB, IJR, TSLA, MSFT, or IIPR, but holds long positions in HD and NKE in personal accounts at the time of publication.

Investment Research Disclaimer

https://mapsignals.com/contact/

 

Retail Earnings and Federal Reserve Set the Trend This Week

Retail sector

Home Depot and Walmart are in the spotlight today with investors anxious to learn how well the retailers are handling the unwelcome combination of supply chain bottlenecks, labor shortages, and climbing inflation. Walmart in particular is considered a good gauge of U.S. consumer health as they sell goods across so many sectors and in every corner of the country.

The retail sector results reported so far are primarily from online vendors, so this week’s bevy of customer facing companies should provide a lot of additional insights into consumer shopping trends that have evolved over the course of the pandemic.

Investors are also very interested to hear holiday season projections as well as what obstacles retailers are most worried about heading into 2022.

Economic data

Today also brings the release of October Retail Sales which are expected to get a boost from an early start to holiday shopping as well as higher gas prices. The Delta Covid wave had mostly receded in October so this month’s report is considered a very important gauge for the U.S. economy. A disappointing number will raise worries that inflation is starting to keep a lid on consumer spending. On the other hand, a strong read will reinforce the bulls’ view that the economy is mostly back on track and consumers are healthy enough to handle the current levels of inflation.

Other economic data today includes Industrial Production, Business Inventories, and the NAHB Housing Market Index.

Federal Reserve

Today also begins a parade of Federal Reserve officials that are making the rounds over the next couple of days. Regional Fed Presidents delivering remarks today include Atlanta’s Raphael Bostic, Philadelphia’s Patrick Harker, and San Francisco’s Mary Daly.

There are another six Fed speakers on tap tomorrow. Investors will be listening very closely for signs that officials are becoming more concerned that inflation is not “transitory” and/or feel the need to move up the timeline for winding down the Fed’s pandemic support.

The Fed most recently indicated it will fully wind down its $120 billion-per-month bond purchases by the middle of next year. At that point, Wall Street expects the Fed will begin lifting interest rates.

This week could also bring a decision from President Biden as to whether Fed Chair Jerome Powell will keep his job, with his term ending in February. There is some speculation that Biden might seek to replace him with current Fed Governor Lael Brainard.

For a look at all of today’s economic events, check out our economic calendar.

Good Time to Sell Home Depot

Dow component Home Depot Inc. (HD) reports Q3 2021 earnings in Tuesday’s pre-market, with analysts looking for a profit of $3.38 per-share on $34.87 billion in revenue. If met, earnings-per-share (EPS) will mark a modest improvement over the same quarter in 2020, when the housing boom was gathering strength. The stock sold off 4.9% in August despite beating Q2 top and bottom line estimates but is now trading close to an all-time high.

Supply Disruptions vs. the Housing Boom

The home improvement giant faces skyrocketing wages and supply chain disruptions like other retailers but has done a good job, so far at least, managing those headwinds.  It’s also in the sweet spot, i.e. a prime beneficiary of the millennial surge in home sales. All signs point to a continuation of this trend in 2022 and perhaps longer, depending on the trajectory of the U.S. economy. Even so, the stock has grown extremely expensive, gaining more than 40% year-to-date.

Wells Fargo analyst Zachary Fadem recently noted that Home Depot had grown “increasingly comfortable in the underlying housing backdrop, long-term opportunities via strategic initiatives, and ability to navigate a host of well documented supply chain and inflationary challenges being felt across retail”. However, the stock has now exceeded his long-term target at $365, adding to concerns about valuation.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 18 ‘Buy’, 3 ‘Overweight’, 12 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $310 to a Street-high $425 while the stock is set to open Monday’s session about $13 above the median $360 target. This placement reinforces a precarious setup, in which the company may need to exceed quarterly estimates by wide margins to avoid an intermediate downturn.

Home Depot finally cleared 2018 resistance above 200 in May 2020, lifting to a new high at 292.95 in August. That marked the 2020 peak, ahead of a March 2021 breakout that stalled at 345.69 in May. Another breakout in October ended at 375 near month’s end, giving way to a holding pattern that’s likely to yield a trend move, higher or lower, after the earnings report. Both weekly and monthly relative strength readings have hit extremely overbought levels at the same time, favoring a decline that could reach 350 as a first target.

For a look at today’s economic events, check out our earnings calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

What Fuels The Stock Market Now?

An outstanding earnings season and signs that economic activity are picking back up are clashing with unrelenting inflation, difficulty finding more labor, and continued supply chain logjams.

Inflation

Most insiders believe inflation has further to climb, though the consensus right now is calling for a peak around the beginning of Q2 next year. With big shopping holidays in the U.S. coming up, followed closely by Chinese New Year at the beginning of February 2022, shipping and transportation logjams aren’t expected to find much relief in the near-term.

Meaning inflation pressures will likely continue. How far inflation will climb as the severe supply chain dislocations drag on is a huge unknown. Some Wall street investors are concerned that the Fed might feel compelled to end its asset purchases and hike rates much sooner than expected if monthly inflation keeps accelerating.

What might be even more worrisome is the fear that some of these price increases could be more permanent in nature, so how much overall inflation will pull back in the long run is starting to become a bigger talking point.

Demand and supply chain

Supply chain insiders warn that many companies are front-loading inventories in an effort to avoid running out of critical materials, which could bite in the long run if demand suddenly drops off. A lot of manufacturers have also increased production capacity for products that currently face shortages. The risk is that once back orders are filled and demand retreats, stockpiling and excess production could result in an oversupply situation in some areas, along with much lower profits and total revenues.

Another worry right now is that demand starts to retreats due to the current inflationary environment especially with everyday items like food and gasoline costing substantially more. That has investors anxious to see the latest Consumer Sentiment read being released today which is expected to edge higher vs. last month.

Investors are closing tracking the inflation expectation gauges in the report as typically the higher those climb, the more consumers tend to pull back on spending.

Data to watch next week

Looking towards next week, the economic data flow picks up with key releases including Empire State Manufacturing on Monday; Retail Sales, Import/Export Prices, Industrial Production, Business Inventories, and the NAHB Housing Market Index on Tuesday; Housing Starts and Building Permits on Wednesday; and the Philadelphia Fed Index on Thursday.

On the earnings front, Q3 reporting is just about wrapped up with companies in the S&P 500 index reporting revenue growth of more than +17%, the second highest on record behind only Q2 2021’s growth of over +25%, according to FactSet. Earnings themselves are on track to exceed +40%. AstraZeneca is today’s earnings highlight. Earnings next week include several big retailers which will provide some more clues as to how consumer demand is trending as well as updates on supply chain struggles. Investors are also keen to hear how holiday hiring is going.

Key earnings reports next week will include Advanced Auto Parts, Lucid, Tyson, and Warner Music on Monday; Home Depot and Walmart on Tuesday; Bath & Body Works, Cisco, Lowe’s, NVIDIA, Target, TJX, and Victoria’s Secret on Wednesday; Alibaba, Applied Materials, Intuit, Kohl’s, Macy’s, Palo Alto Networks, Ross Stores, and Williams Sonoma on Thursday; and The Buckle and Foot Locker on Friday.

Checking in on the geopolitical front, the U.S. is warning that Russia may be planning a full-scale invasion of Ukraine. U.S. officials say they’ve briefed their EU counterparts about concerns over a possible military operation, citing a buildup of Russian troops along the Ukraine border. Tensions are boiling still in Belarus and Russia is fanning the flames on that front as well.

SP500 commentary

ES ##-## (Daily) 2021_11_14 (1_49_54 AM)

The bearish accumulation divergence played very well last week. Moreover, the Advance Decline Line is weaker than the price is. It is also a negative factor in the short term. Potentially SP500 started the formation of the bull flag. Finding support at lower levels would be a great buying point with a target of 4800.

The major economic indicators are still bullish despite rising inflation. 4500 level is a psychological level bears will target if 4600 fails. Current levels can be considered only for intraday trading. At the same time, lower levels are needed to get a good risk/reward ratio for swing traders.

For a look at all of today’s economic events, check out our economic calendar.

Earnings Week Ahead: Advance Auto Parts, Home Depot, Nvidia and Ross Stores in Focus

Earnings Calendar For The Week Of November 15

Monday (November 15)

IN THE SPOTLIGHT: ADVANCE AUTO PARTS

The leading automotive aftermarket parts retailer Advance Auto Parts is expected to report its third-quarter earnings of $2.87 per share, which represents year-over-year growth of over 2% from $2.81 per share seen in the same period a year ago.

The Raleigh, North Carolina-based company would post revenue growth of nearly 2% to $2.6 billion up from $2.54 billion registered a year earlier. The company has beaten earnings per share (EPS) estimates three times in the last four quarters.

Advance Auto Parts (AAP) operates in a defensive (recession-resistant) category and has one of the largest long-term EBIT margin expansion opportunities in our coverage (we estimate 300-400 bps over time). COVID-19 slowed parts of AAP’s transformation but gross and EBIT margin upside from internal initiatives is still expected beginning in 2021,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Significant and improving FCF generation plus share repurchases likely to enhance EPS growth. We think the combination of a defensive category, AAP’s progress generating stable top-line growth, and significant margin upside all make for an upside case. Slowing topline momentum and associated risk to margin trajectory balance the risk/reward skew.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 15

Ticker Company EPS Forecast
AAP Advance Auto Parts $2.87
JJSF J&J Snack Foods $1.28
CMP Compass Minerals International $0.62

Tuesday (November 16)

IN THE SPOTLIGHT: HOME DEPOT

The largest home improvement retailer in the United States, Home Depot, is expected to report its third-quarter earnings of $3.39 per share, which represents year-over-year growth of about 7% from $3.18 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of over 4% to $34.942 billion from $33.54 billion a year earlier. In the last two years, the company has beaten earnings per share (EPS) estimates in most of the quarters with a surprise of over 5%.

Home Depot shares have gained nearly 40% so far this year. The stock closed 1.36% higher at $372.63 on Friday. Home Depot’s better-than-expected results, which will be announced on Nov 16, could help the stock hit new all-time highs.

“Shares of Home Depot have risen and outpaced the industry year to date. The company boasts a robust surprise trend with the fifth straight quarter of earnings and sales beat in second-quarter fiscal 2021. Results gained from continued demand for home improvement projects, the robust housing market and ongoing investments. The company is effectively adapting to the demand for renovations and construction activities, driven by prudent investments,” noted analysts at ZACKS Research.

“It is gaining from growth in Pro and DIY customer categories as well as digital momentum. However, in the second quarter, the company witnessed year-over-year moderation in its comparable-store sales growth. This was due to the lapping of the high demand environment for home-improvement projects seen last year. Soft gross margin, stemming from increased penetration of lumber, has also been a drag.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 16

Ticker Company EPS Forecast
ICP Intermediate Capital £32.70
HSV Homeserve £6.60
ARMK Aramark $0.19
HD Home Depot $3.35
DLB Dolby Laboratories $0.35
LAND Land Securities £18.78
IMB Imperial Brands PLC £138.10

Wednesday (November 17)

IN THE SPOTLIGHT: NVIDIA

The Santa Clara, California- based multinational technology company, Nvidia, is expected to report its third-quarter earnings of $1.11 per share, which represents a year-over-year decline of over 60% from $2.91 per share seen in the same period a year ago.

The company, which designs graphics processing units for the gaming and professional markets, as well as system on a chip unit for the mobile computing and automotive market would post year-over-year revenue growth of over 40% to $6.8 billion.

According to Oppenheimer analyst Rick Schafer, Nvidia will report above-consensus October quarter results, lifting its price target to $350 from $235 and rating the company “outperform”.

“Supply constraints continue to weigh on the group, though we see Nvidia (NVDA), a top semi-supplier, as better positioned to secure capacity. The company’s leading soup-to-nuts software/hardware platform solidifies its AI accelerator dominance,” Oppenheimer analyst Rick Schafer wrote in his report, reported by Reuters.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 17

Ticker Company EPS Forecast
BLND British Land Company £8.75
SGE The Sage Group £11.11
LOW Lowe’s Companies $2.33
CPRT Copart $0.99
NVDA Nvidia $1.11
CPA Copa -$0.19
KLIC Kulicke And Soffa Industries $2.07
TTEK Tetra Tech $1.00
HI Hillenbrand $0.91
SSE SSE £11.80

Thursday (November 18)

IN THE SPOTLIGHT: ROSS STORES

The second-largest off-price retailer in the U.S., Ross Stores, is expected to report its third-quarter earnings of $0.79 per share, which represents a year-over-year decline of over 24% from $1.02 per share seen in the same period a year ago.

The U.S. home fashion chain would post year-over-year revenue growth of nearly 16% to $4.4 billion. The company has beaten earnings per share (EPS) estimates three times in the last four quarters.

“Market share capture from competitor bankruptcies & store closures, favourable customer fundamentals, and high exposure to Hispanics, the fastest-growing US population segment, support 6-8% long-term revenue growth and 10%+ annual EPS. Upward EPS revisions appear an ongoing positive share price catalyst. Profit flow-through is magnified when comps exceed the 1-2% plan in a typical year,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“The ‘everyday value’ proposition fosters comp outperformance, while recessions accelerate customer acquisition. Low average selling prices ($8-10/unit) and narrow gross margin render selling online unprofitable at this price point.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 18

Ticker Company EPS Forecast
NG National Grid £15.70
HLMA Halma £21.19
RMG Royal Mail -£6.30
NJR New Jersey Resources $0.08
KSS Kohl’s $0.69
HP Helmerich & Payne -$0.50
MMS Maximus $0.87
BJ BJs Wholesale Club Holdings Inc $0.79
M Macy’s $0.29
BERY Berry Plastics $1.53
NUAN Nuance Communications $0.20
BRC Brady $0.76
ROST Ross Stores $0.79
INTU Intuit $0.97
FTCH Farfetch -$0.24
ESE ESCO Technologies $0.78

Friday (November 19)

Ticker Company EPS Forecast
BKE Buckle $0.80
FL Foot Locker $1.34

 

Home Depot Hovers Near Record High Ahead of Q3 Earnings; Target Price $400 in Best Case

Home Depot Inc, the largest home improvement retailer in the United States, is expected to report its third-quarter earnings of $3.39 per share, which represents year-over-year growth of about 7% from $3.18 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of over 4% to $34.942 billion from $33.54 billion a year earlier. In the last two years, the company has beaten earnings per share (EPS) estimates in most of the quarters with a surprise of over 5%.

Home Depot shares have gained nearly 40% so far this year. At the time of writing, the stock was trading 1.02% higher at $371.41 on Friday. Home Depot’s better-than-expected results, which will be announced on Nov 16, could help the stock hit new all-time highs.

Analyst Comments

“Shares of Home Depot have risen and outpaced the industry year to date. The company boasts a robust surprise trend with the fifth straight quarter of earnings and sales beat in second-quarter fiscal 2021. Results gained from continued demand for home improvement projects, the robust housing market and ongoing investments. The company is effectively adapting to the demand for renovations and construction activities, driven by prudent investments,” noted analysts at ZACKS Research.

“It is gaining from growth in Pro and DIY customer categories as well as digital momentum. However, in the second quarter, the company witnessed year-over-year moderation in its comparable-store sales growth. This was due to the lapping of the high demand environment for home-improvement projects seen last year. Soft gross margin, stemming from increased penetration of lumber, has also been a drag.”

Home Depot Stock Price Forecast

Twelve analysts who offered stock ratings for Home Depot in the last three months forecast the average price in 12 months of $373.60 with a high forecast of $400.00 and a low forecast of $325.00.

The average price target represents a 0.70% change from the last price of $371.00. From those 12 analysts, 11 rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Technical analysis suggests that it is good to buy as 100-day Moving Average, and 100-200-day MACD Oscillator hints at a strong buying opportunity.

Morgan Stanley gave the base target price of $370 with a high of $455 under a bull scenario and $240 under the worst-case scenario. The firm gave an “Overweight” rating on the home improvement retailer’s stock.

“We are Overweight Home Depot (HD) given its best-in-class nature and structural housing tailwinds beyond N-T disruption from COVID-19. The stock seems attractively valued in the context of a potential 2021/2022 economic/housing boom,” noted Simeon Gutman, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Telsey Advisory Group lifted the target price to $390 from $370. Citigroup upped the price target to $418 from $375. JPMorgan raised the target price to $397 from $340.

Check out FX Empire’s earnings calendar

Lowe’s Charts Its Own Course, Shares Up 10%

Shares of home-improvement retailer Lowe’s soared by a double-digit percentage on Wednesday on the heels of the company’s better-than-expected Q2 earnings report. Lowe’s investors were pleasantly surprised after rival company Home Depot’s quarterly results left that stock sinking just a day earlier.

Lowe’s reported a net profit of USD 3 billion or USD 4.25 per diluted share, which surpassed Wall Street’s estimates. Revenue came in at USD 27.6 billion, while comparable sales fell by 1.6%, though the damage was less than feared.

For the full year 2021, Lowe’s lifted its forecast to revenue of USD 92 billion and is targeting share buybacks worth USD 9 billion. Previously Lowe’s predicted full-year revenue of USD 86 billion.

Reports suggest that construction professionals and repairmen are buying up tools. The do-it-yourself trend that caught on during the height of the pandemic has lost steam, which pressured same-store sales. Lately, homeowners are hiring the pros to do what they were previously willing to do themselves.

Another trend that is emerging is consumers are jumping on the low interest rates in the economy and springing for larger homes. This has fueled spending on home appliances and decor, all of which benefits retailers like Lowe’s.

Glass Half Full

Investors were able to focus on Lowe’s improved sales outlook instead of the disappointing same-store sales results. The stock is up 10% and is trading back above the USD 200 level, which it has not seen since July 23. In fact, Lowe’s hasn’t seen its stock rise this much in over a year.

Home Depot Letdown

Lowe’s results came as a surprise to some investors, based on the social media response, considering that Home Depot’s quarter was a letdown. Similar to Lowe’s, Home Depot also reported weaker than expected U.S. same-store sales, which hasn’t happened since 2019. Fewer people ventured out to Home Depot in the quarter, despite higher ticket sales. Unlike Lowe’s, however, Home Depot was not able to turn the sentiment around on earnings day.

Investors punished Home Depot’s stock on Tuesday, sending shares lower by more than 4% and pressuring the Dow Jones Industrial Average. By Wednesday, Home Depot’s stock was in recovery mode, perhaps riding on the coattails of Lowe’s, and recouped 1.5% of its declines.

With the threat of the delta variant and a less dovish Fed, however, it remains to be seen how consumers will behave for the rest of the year.

Home Depot Could Sell Off to 300

Dow component Home Depot Inc. (HD) is trading lower by more than 3% in Tuesday’s pre-market after beating Q2 2021 top and bottom line estimates by slim margins. The home improvement giant posted a profit of $4.53 per-share during the quarter, $0.10 better than expectations, while revenue rose a modest 8.1% year-over-year to $41.12 billion, less than $400 million above consensus. US sales rose just 3.4%, highlighting tough ‘comps’ after last year’s COVID-driven windfall.

Post-Pandemic Hangover

The company generated historic revenue in 2020, underpinned in the first half by pandemic lockdowns that freed up time for at-home activities, and in the second half by the migration of the Zoom crowd to new parts of the country.  Mean reversion has now resumed control of quarterly performance, easing toward historic norms that underpinned years of higher prices. However, the stock has already gained 22% so far in 2021, raising doubts about second half performance.

Other big players in the retail space are dealing with similar headwinds, as evidenced by an identical sell-the-news reaction after Walmart Inc. (WMT) also beats estimates on Tuesday.  Amazon.com Inc. (AMZN) remains the poster child for this 2021 performance hangover, posting a 0% return since July 2020 after soaring 81% earlier that year. All in all, this malaise perfectly illustrates the old market adage that “the bigger the move, the broader the base”.

Wall Street and Technical Outlook

Wall Street consensus is locked into an ‘Overweight’ rating based upon 19 ‘Buy’, 4 ‘Overweight’, 20 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $300 to a Street-high $391 while the stock is set to open Tuesday’s session about $27 below the median $350 target. A descent to the low target is possible with this configuration, which makes sense because support at June’s rangebound low is situated just below that level.

Home Depot broke out above 2018 resistance just above 200 in September 2019 and topped out at 247.36 in February 2020, ahead of a pandemic decline that dropped the stock to a three-year low. The subsequent uptick mounted first quarter resistance in June, yielding a two-legged advance that posted an all-time high at 345.69 in May 2021. A persistent pullback found support at 303.83 in June while the bounce into August has reversed at the .786 Fibonacci selloff retracement level. In turn, this also raises odds for a quick trip to 300.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Earnings to Watch Next Week: Home Depot, Walmart, Target and Deere in Focus

Earnings Calendar For The Week Of August 16

Monday (August 16)

Ticker Company EPS Forecast
ATAI ATA -$0.18
FN Fabrinet $1.21
AG First Majestic Silver $0.09
TOELY Tokyo Electron Ltd PK $1.22

Tuesday (August 17)

IN THE SPOTLIGHT: HOME DEPOT, WALMART

HOME DEPOT: the largest home improvement retailer in the United States, is expected to report its second-quarter earnings of $4.42 per share, which represents year-over-year growth of about 10% from $4.02 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of nearly 7% to $40.68 billion. On average, Home Depot has beaten earnings estimates by more than 10% in the last four quarters.

“We are Overweight Home Depot (HD) given its best-in-class nature and structural housing tailwinds beyond N-T disruption from COVID-19. The stock seems attractively valued in the context of a potential 2H’20/2021 economic/housing boom,” noted Simeon Gutman, equity analyst at Morgan Stanley.

WALMART: The Bentonville, Arkansas-based retailer is expected to report its second-quarter earnings of $1.56 per share same as a year ago. However, the multinational retail corporation that operates a chain of hypermarkets’ revenue would decline over 1% to $135.9 billion. On average, the retail giant has beaten earnings estimates by over 17% in the last four quarters.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 17

Ticker Company EPS Forecast
AIT Applied Industrial Technologies $1.17
HD Home Depot $4.42
WMT Walmart $1.57
AMCR Amcor PLC $0.22
A Agilent $0.99
CDK Cdk Global $0.67
JKHY Jack Henry Associates $0.93
CREE Cree -$0.24

Wednesday (August 18)

IN THE SPOTLIGHT: TARGET

TARGET: One of the largest North American retailers offering customers both everyday essentials and fashionables, is expected to report its second-quarter earnings of $3.49 per share, which represents year-over-year growth of over 3% from $3.38 per share seen in the same period a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 69%. The Minneapolis, Minnesota-based company would post year-over-year revenue growth of over 8% to $24.84 billion.

Walmart (WMT) & Target (TGT) likely to print upside given strong comp sales trends, a healthy consumer bolstered by child tax credits, & one of the best back to school seasons in retail. We prefer TGT given prospects of a greater beat and a lower relative valuation. We also enclose: Cowen’s Target x ULTA analysis, & our online grocery survey highlights WMT’s momentum. Raise TGT PT to $300 & maintain WMT’s $170 PT,” noted Oliver Chen, equity analyst at Cowen.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 18

Ticker Company EPS Forecast
LOW Lowe’s Companies $3.99
TGT Target $3.49
ADI Analog Devices $1.61
EAT Brinker International $1.71
TJX TJX Companies $0.58
VIPS Vipshop $2.32
YY YY -$0.60
NVDA Nvidia $1.02
KEYS Keysight Technologies $1.44
SNPS Synopsys $1.78
CSCO Cisco Systems $0.83
SQM Sociedad Quimica Y Minera De Chile $0.32
VNET 21Vianet -$0.06
TCEHY Tencent $0.52
MBT Mobile TeleSystems OJSC $20.23

Thursday (August 19)

IN THE SPOTLIGHT: KOHL’S

Kohl’s, the largest department store chain in the United States, is expected to report its second-quarter earnings of $1.17 per share, which represents year-over-year growth of over 565% from a loss of -$0.25 per share seen in the same period a year ago.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 19

Ticker Company EPS Forecast
KSS Kohl’s $1.17
TPR Tapestry Inc $0.68
EL Estée Lauder $0.51
M Macy’s $0.19
BJ BJs Wholesale Club Holdings Inc $0.63
MSGS Madison Square Garden Sports -$0.76
AMAT Applied Materials $1.77
ROST Ross Stores $0.97
FTCH Farfetch -$0.30
NCMGY Newcrest Mining Ltd PK $0.75
GFI Gold Fields $0.47

Friday (August 20)

IN THE SPOTLIGHT: DEERE

Deere & Company, the world’s largest maker of farm equipment, is expected to report its fiscal third-quarter earnings of $4.57 per share, which represents year-over-year growth of over 77% from $2.57 per share seen in the same period a year ago.

In the last four consecutive quarters, on average, the agricultural, construction, and forestry equipment manufacturer has delivered an earnings surprise of over 65%. The company forecasts net income for fiscal 2021 in the range of $5.3 billion to $5.7 billion, up from the previous projection of $4.6 billion to $5 billion, according to ZACKS Research.

Deere (DE) is one of the highest quality, most defensive names within the broader Machinery universe, given a historically lower cyclicality of Ag Equipment and history of strong management execution. FY21 should mark a tangible acceleration in the NA large ag replacement cycle, as commodity tailwinds are complemented by moderating trade headwinds and improving farmer sentiment,” noted Courtney Yakavonis, equity analyst at Morgan Stanley.

“With mgmt continuing to execute against its 15% mid-cycle operating margin target, we see continued momentum in DE’s margin improvement narrative – representing one of the most attractive idiosyncratic margin improvement narratives in the broader Machinery group.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 20

Ticker Company EPS Forecast
DE Deere & Company $4.57
BKE Buckle $0.51
FL Foot Locker $0.97

 

Home Depot’s Q1 Earnings to Rise 10%, Revenue to Jump 7%

Home Depot Inc, the largest home improvement retailer in the United States, is expected to report its second-quarter earnings of $4.42 per share, which represents year-over-year growth of about 10% from $4.02 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of nearly 7% to $40.68 billion. On average, Home Depot has beaten earnings estimates by more than 10% in the last four quarters.

Home Depot shares have gained over 65% so far this year. The stock closed about 1% lower at $334.02 on Thursday. Home Depot’s better-than-expected results, which will be announced on Aug 17, could help the stock hit new all-time highs. But the stock’s performance could hinge on margins.

As reported previously, the home improvement giant earned $3.86 per share, beating Wall Street’s expectation of $0.93, and its revenue grew 32.7% year-over-year to $37.5 billion, more than $5 billion above consensus. Globally, sales grew 31%, while U.S. sales grew 29%.

Analyst Comments

“We are Overweight Home Depot (HD) given its best-in-class nature and structural housing tailwinds beyond N-T disruption from COVID-19. The stock seems attractively valued in the context of a potential 2H’20/2021 economic/housing boom,” noted Simeon Gutman, equity analyst at Morgan Stanley.

Home Depot Stock Price Forecast

Fourteen analysts who offered stock ratings for Home Depot in the last three months forecast the average price in 12 months of $349.83 with a high forecast of $386.00 and a low forecast of $310.00.

The average price target represents a 4.73% change from the last price of $334.02. From those 14 analysts, 10 rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $345 with a high of $430 under a bull scenario and $220 under the worst-case scenario. The firm gave an “Overweight” rating on the home improvement retailer’s stock.

Several other analysts have also updated their stock outlook. Jefferies raised the target price to $380 from $375. Credit Suisse lifted the price target to $357 from $330. Mizuho upped the price objective to $50 from $45.

Check out FX Empire’s earnings calendar

Home Depot Trading Higher After Beating Estimates

Dow component Home Depot Inc. (HD) is trading higher by more than 2% in Tuesday’s pre-market after beating Q1 2021 top and bottom line estimates by healthy margins. The home improvement giant earned $3.86 per-share during the quarter, $0.93 better than estimates, while revenue rose a healthy 32.7% year-over-year to $37.5 billion, nearly $5 billion higher than consensus. Comparative sales grew 31% worldwide, with 29% growth in the United States.

Home Buying Boom

The company has benefited from intense pandemic tailwinds, with locked-down and socially-distanced customers using the crisis to engage in home improvement projects. While that catalyst is winding down at a rapid pace, COVID also triggered a major geographical shift at the same time that remote-working millennials are marrying and building their nests, underpinning a massive home building and buying spree that should last for several years, at a minimum.

Despite Home Depot’s stellar report, bullish sentiment could offer a better opportunity for rival Lowes Corp. (LOW), who reports Q1 earnings in Tuesday’s pre-market. Oppenheimer analyst Brian Negal embraced this strategy last week. noting this “more upbeat call on Lowe’s is largely tactical in nature and hinged upon prospects for a continued flow of funds into more cyclically focused equities and now historically discounted valuation versus that of Home Depot.”

Wall Street and Technical Outlook

Wall Street consensus on Home Depot now stands at an ‘Overweight’ rating based upon 21 ‘Buy’, 3 ‘Overweight’, 10 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $280 to a Street-high $377 while the stock is set to open Tuesday’s session about $24 below the median $350 target. A trip back up last week’s all-time high at $345.69 looks likely with this configuration but a breakout might not be in the cards.

Home Depot sold off from a 2020 high at 247 to a three-year low near 140 during the first quarter of 2020 and turned sharply higher, returning to the prior high in May. A June breakout stalled just below 300 in August while a March 2021 buying surge above that peak posted an all-time high last week.  A weekly Stochastic sell cycle makes a breakout unlikely in the second quarter but the long-term uptrend should eventually resume control of the ticker tape.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.