The last group of companies scheduled to report third quarter financial results this season are major U.S. retailers.
The sector includes several notable winners amid the COVID-19 pandemic as consumers accelerated their shift to online shopping in the wake of social distancing restrictions and government-mandated lockdown measures.
Not surprisingly, retail-related ETFs are trading near their best levels on record, with the SPDR S&P Retail ETF (NYSE:XRT) up around 19% so far this year, compared to the S&P 500’s roughly 10% gain over the same period.
Ahead of their upcoming quarterly reports, we'll highlight three of the best-performing names in the sector which have proven they can successfully compete with Amazon (NASDAQ:AMZN) online:
1. Home Depot: Reports Nov. 17 Before Markets Open
- EPS Growth Estimate: +18.2% YoY
- Revenue Growth Estimate: +15% YoY
Home Depot (NYSE:HD) has been riding high this year, with shares of the Atlanta, Georgia-based retailer jumping by around 26% in 2020, as Americans invested more in their homes and made renovations amid coronavirus-related lockdowns.
The stock, which hit an all-time high of $292.90 in late August, settled at $275.57 on Tuesday, giving the largest U.S. home improvement retailer a market cap of $296.6 billion.
Home Depot, which reported a massive beat on earnings and revenue in the second quarter, is projected to post earnings per share of $2.99 on Tuesday, a 18.2% increase from EPS of $2.53 in the same quarter a year earlier.
Revenue is forecast to rise 15% from the year-ago period to $31.3 billion, thanks to strong demand for its assortment of building materials and construction products from do-it-yourself customers.
In addition to earnings and revenue, investors will be paying close attention to growth in Home Depot’s e-commerce figures, which jumped more than 100% year-over-year in the second quarter. The company noted that 60% of those sales were bought online and picked up in-store.
U.S. comparable sales—revenue generated by a retail location—will be of key importance, especially when considering the 25% surge seen in Q2.
Looking ahead, comments from management regarding the lingering impact of the coronavirus on global supply chains will also be of interest.
2. Target Reports Nov. 18 Before Markets Open
- EPS Growth Estimate: +11.8% YoY
- Revenue Growth Estimate: +10.4% YoY
Target (NYSE:TGT) has been a powerful performer in the retail space this year, with shares up around 23% in 2020, due in large part to rapid growth in e-commerce and online sales amid the ongoing coronavirus pandemic.
The Minneapolis, Minnesota-based retailer’s stock—which touched an all-time high of $167.41 on Oct. 20—ended at $158.07 on Tuesday, giving it a valuation of $79.1 billion.
After reporting blowout second quarter results in August, consensus calls for Target to post third quarter earnings per share of $1.52 next Wednesday, which would indicate a year-over-year growth rate of around 12% from EPS of $1.36.
Revenue meanwhile is expected to climb roughly 10% from the year-ago period to $20.62 billion thanks to ongoing efforts made by the big-box retailer to add faster shipping options and in-store order pickups.
As such, investors will pay close attention to growth in Target’s e-commerce figures, which soared by a record 195% in the previous quarter. The company announced on its last earnings report that sales through its curbside pickup service spiked by more than 700% in Q2 from a year earlier.
Investors will also monitor comparable sales—which include sales both online and at stores open for at least a year—to see whether it can maintain its impressive streak of beats. Target said the key metric surged by an all-time high 24.3% in the three months ended Aug. 1.
Overall comments on the economy and the health of the U.S. consumer from executives on the post-earnings conference call will also be of note as Target prepares for the holidays amid the ongoing pandemic.
3. Best Buy: Reports Nov. 24 Before Markets Open
- EPS Growth Estimate: +45.1% YoY
- Q3 Revenue Growth Estimate: +10.9% YoY
Best Buy (NYSE:BBY) has thrived throughout 2020, with the consumer tech giant benefitting from robust e-commerce revenue growth during the COVID-19 outbreak. The Richfield, Minnesota-based retailer has seen its stock jump roughly 29% since the start of the year.
Shares, which hit a record high of $124.82 on Nov. 5, settled at $112.63 yesterday, giving the biggest U.S. consumer electronics retailer a market cap of $29.1 billion.
Best Buy's earnings and revenue easily topped views in the last quarter. For Q3, consensus estimates call for the tech gadget retailer to post earnings of $1.64 per share Tuesday, Nov. 24, rising 45.1% from EPS of $1.13 in the year-ago period.
Revenue is expected to reach $10.83 billion, up roughly 11% from sales of $9.76 billion in the same period a year earlier, reflecting ongoing demand for computers, tablets and other work-from-home equipment.
Investors will be keen to see if the retailer’s domestic online sales can keep up their torrid pace of growth after surging more than 240% in Q2 to $4.85 billion. The company continues to be one of only a handful of electronics retailers still thriving amid growing competition from Amazon.
Beyond the top-and-bottom-line numbers, market players are hoping Best Buy will provide guidance for its key fourth quarter, which covers the holiday shopping season after it failed to offer a forecast of its results in the previous quarter because of the uncertainty surrounding the pandemic.