Retail ETFs Look Strong Post Q2 Earnings

The overall earnings picture for the retail sector has been decent amid the ongoing pandemic. Total earnings from 94.5% of the sector’s total market capitalization reported so far are flat on 6.7% higher revenues with 76.9% of the companies beating on earnings and 84.6% exceeding top-line estimates. While the growth pace is well below the four-quarter average, revenues and earnings surprises are much better than the recent quarters.

This is especially true as the digital shift has led to soaring e-commerce sales for traditional brick-and-mortar retailers. As such, most of them came up with stronger-than-expected results with a beat on both the top and bottom lines though a few still lost in terms of share value.

Let’s dig into the details of some of the earnings releases.

Earnings in Focus

Big-box retailer Target (TGT - Free Reportjumped 11.2% following the earnings announcement. It topped the Zacks Consensus Estimate for earnings and revenues by $1.74 and $2.7 billion, respectively. The company has surpassed earnings estimates every time since the October quarter of 2018.

On the other hand, the world's largest retailer, Wal-Mart (WMT - Free Reporttopped earnings estimates by 34 cents and revenue estimates by $2.87 billion. It has posted the biggest-ever growth in online sales as consumers increasingly turned online to shop for everything from electronics and toys to groceries during the pandemic. However, the share price of WMT fell 2.3% in response to its earnings announcement.

The second-largest home improvement retailer, Lowe’s (LOW - Free Reportbeat earnings estimates by 72 cents and revenues by $2.4 billion. This represents the fifth-straight earnings beat and the second-consecutive sales surprise. The stock gained 0.4% in response to its earnings announcement. Meanwhile, shares of Home Depot (HD - Free Report), the world's largest home improvement retailer, plunged 1.9% in response to its earnings announcement. Earnings per share of $4.02 surpassed the Zacks Consensus Estimate of $3.82 while revenues outpaced the consensus mark by $2.9 billion.

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