For immediate release
Chicago, IL – August 22, 2024 – Sheraz Mian, head of research at Zacks, says, “Among the 473 S&P 500 companies that reported second-quarter results, total earnings rose 8.0% compared to the same period last year, on revenues up 5.0%.”
Retail earnings breakdown: good or bad?
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report with detailed historical actuals and estimates for the current and following periods by clicking here>>>
Here are the key points:
-
The second-quarter earnings season revealed an overall stable picture of corporate profitability, with management teams generally providing a reassuring view of the economic reality. However, question marks have emerged over the outlook, with estimates for the current period declining more than in the past two periods.
-
Of the 473 S&P 500 companies that reported second-quarter results (94.6% of all index members), total earnings increased 8.0% year-over-year, with revenues up 5.0%. 79.7% beat earnings per share estimates and 59.8% beat revenue estimates.
-
For the retail sector, we now have Q2 results from 96.2% of the sector’s market cap in the S&P 500 index. Total earnings for these companies increased 17.3% from the same period last year, with revenues up 4.8%. 62.1% beat EPS estimates and 44.8% beat revenue estimates.
-
This is a weaker performance compared to what we have seen from these retail companies in more recent periods. Second-quarter earnings growth turns negative when Amazon’s results are stripped out of the sector numbers. The second-quarter percentage gains for this group of retail companies are a new low in the previous 20-quarter period.
The focus of earnings in recent days has been on the retail sector with Goal TGT significantly exceeded expectations on comparable store sales (comps), earnings and positive earnings guidance. Target shares rose sharply after several quarters of declines due to the resumption of positive comps, with demand for a number of non-essential goods performing favorably. This confirmed the positive trends we have seen in the non-essential categories in Walmart WMT quarterly report with above-average results a few days ago.
Target shares have lagged Walmart by a wide margin, reflecting the company’s strong focus on nonessential goods. Walmart, on the other hand, has benefited from its strong focus on groceries and other everyday goods.
We discussed the earnings summary for the retail sector and how the second quarter results compare to other recent periods in Section 1 of this report.
The overall picture of earnings
For the current period (Q3 2024), the S&P 500 is expected to report a total gain of 3.9% over the same period last year, with revenue up 4.6%. Estimates have been declining since the beginning of the quarter.
This is a larger decrease in estimates compared to the comparable periods of the previous two quarters. The trend of negative revisions is widespread and not concentrated in one or two sectors. Estimates for 14 of the 16 Zacks sectors were cut during this period. The Technology and Financials sectors are the only ones to see positive estimate revisions during this period.
Please note that this year’s earnings growth of +8.0% with only +1.8% revenue growth reflects revenue weakness in the financial sector. Excluding the financial sector, the earnings growth pace changes to +7.5% and the revenue growth rate improves to +4.2%. In other words, about half of this year’s earnings growth is due to revenue growth, with the rest coming from margin expansion.
In terms of margins, 11 of the 16 Zacks sectors are expected to have higher year-over-year margins in 2024, with technology, financials and consumer discretionary sectors being the biggest winners.
Why haven’t you checked out Zacks’ top stocks?
Since 2000, our top stock picking strategies have far exceeded the S&P’s average gain of +7.0 per year. Amazingly, they grew with average gains of +44.9%, +48.4% And +55.2% per year.
Today you can access their live tips free of charge and without obligation.
View stocks for free >>
Media contact
Zacks Investment Research
800-767-3771 extension 9339
https://www.zacks.com
Zacks.com provides investment resources and information about these resources for you to use in making your own investment decisions. Zacks provides information about this resource to you subject to the Zacks Terms and Conditions disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Any investment involves the risk of loss. This material is for informational purposes only and does not constitute investment, legal, accounting or tax advice or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether any investment is suitable for any particular investor. No assumption should be made that investments in any security, company, sector or market identified and described have been or will be profitable. All information is current as of the date of publication and is subject to change without notice. The views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities in securities. These returns are from hypothetical portfolios consisting of Zacks Rank = 1 stocks that are rebalanced monthly with no transaction costs. These are not the returns of actual stock portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information on the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Download the 7 best stocks for the next 30 days today. Click here to get this free report
Target Corporation (TGT): Free Stock Analysis Report
Walmart Inc. (WMT): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
