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The retail sector is in focus ahead of the earnings releases from big retailers. Big-box retailers like Walmart (WMT - Free Report), Home Depot (HD - Free Report), Lowe’s (LOW - Free Report), and Target (TGT - Free Report), as well as store channels like Nordstrom (JWN - Free Report) and Kohls (KSS - Free Report) are expected to report this week and the next.

Overall, the retail sector is expected to report an earnings decline of 0.1% on 5.2% revenue growth. The earnings season is coming to an end, with about 45% of the companies yet to report only from this sector. The traditional retail ETFs are thus in focus. SPDR S&P Retail ETF (XRT - Free Report) and VanEck Vectors Retail ETF (RTH - Free Report) have gained 1.5% and 5.4%, respectively, so far this year.

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.

Walmart is scheduled to report on May 18 before market open. It has a Zacks Rank #3 and an Earnings ESP of +1.16%. The company saw a positive earnings estimate revision of a penny over the past 7 days 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 average earnings surprise of 6.45% in the last four quarters. Walmart has a VGM Score of A.

Home Depot has a Zacks Rank #3 and an Earnings ESP of -1.75%. It saw negative earnings estimate revision of a couple of cents for the to-be-reported quarter in the past 7 days but delivered an average earnings surprise of 4.39% in the last four quarters. The stock has a VGM Score of B. The company is expected to report earnings before the opening bell on May 16.

Lowe’s is slated to report earnings before the bell on May 23. The stock has a Zacks Rank #3 and an Earnings ESP of -1.11%. The company witnessed a negative earnings estimate revision of a penny over the past 7 days for the to-be-reported quarter but delivered an earnings surprise of 4.38%, on average, in the last four quarters.

Target is likely to report earnings on May 17, before the opening bell. It has a Zacks Rank #3 and an Earnings ESP of +0.40%. The company saw a negative earnings estimate revision of a couple of cents over the past 7 days for the to-be-reported quarter and delivered a negative earnings surprise of 16.12% for the last four quarters.

Nordstrom, which will likely report earnings on May 31 after the closing bell, has a Zacks Rank #3 and an Earnings ESP of -42.86%. It saw no earnings estimate revision for the to-be-reported quarter in the past 30 days. However, the company delivered an earnings surprise of 20.7%, on average, over the past four quarters.

Kohls has a Zacks Rank #3 and an Earnings ESP of -3.88%. It saw a positive earnings estimate revision of a couple of cents for the to-be-reported quarter in the past 7 days. Kohls delivered a negative average earnings surprise of 105.8% in the last four quarters. The company is expected to report before the opening bell on May 24.

ETFs in Focus

SPDR S&P Retail ETF (XRT)

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 well-diversified 88 stocks in its basket, with none making up for more than a 2.1% share. Additionally, SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in specialty retail, automotive retail, apparel retail, and broad-line retail.

SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $337.3 million and an average trading volume of 6.4 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.

VanEck Vectors Retail ETF (RTH)

VanEck Vectors Retail ETF provides exposure to the 25 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 21% exposure, while the other firms hold no more than 9.4% share.

VanEck Vectors Retail ETF has amassed $144.7 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 #3 with a Medium risk outlook.

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