EC Previewing Retail Sector Earnings As Inflation Climbs

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Walmart (WMT - Free Report) shares have been a rock of stability in the ongoing market turmoil. You can see this in the chart below that shows the year-to-date performance of Walmart shares relative to the S&P 500 index (green line) and the Zacks Retail sector (red line).

Zacks Investment Research

WMTSource: Zacks Investment Research

Part of the explanation for Walmart’s stock market stability is the nature of its business that offers a high degree of defense during periods of economic instability and uncertainty. This almost ‘staple’ aspect of Walmart’s business can also be seen in the recent stock market behavior of peers like Costco (COST - Free Report), CVS (CVS - Free Report), Target (TGT - Free Report), and others. That said, Walmart shares have fared better than its peers in the year-to-date period.

It will be interesting to see if Walmart and Target can sustain their recent performance momentum after quarterly reports this week, with Walmart reporting before the market’s open on Tuesday, May 17th, and Target the following morning.

Walmart shares were up following the last quarterly release on February 17th, even though it had to spend more to keep shelves stocked and stores staffed, with supply-chain costs coming in $400 million more than it had budgeted and the Omicron surge significantly adding to its Covid-specific paid-leave costs.

Estimates for Walmart’s April quarter had come down following the last quarterly release, but have since remained stable, reflecting a greater degree of confidence in the company’s ability to navigate the prevailing logistical challenges.

With respect to the Retail sector's 2022 Q1 earnings season scorecard, we now have results from 21 of the 34 retailers in the S&P 500 index. Total Q1 earnings for these retailers are down -24.1% from the same period last year on +10.9% higher revenues, with 61.9% beating EPS estimates and 76.2% beating revenue estimates.

The comparison charts below put the Q1 beats percentages for these retailers in a historical context.

Zacks Investment Research

Image Source: Zacks Investment Research

As you can see above, retailers have been struggling to achieve positive surprises thus far.

With respect to the earnings and revenue growth rates, Amazon’s weak numbers play a significant role in the strong year-over-year growth rate for the sector (Amazon is part of the Zacks Retail sector, and not the Zacks Technology sector). The two comparison charts below show the Q1 earnings and revenue growth relative to other recent periods, both with Amazon’s results (left side chart) and without Amazon’s numbers (right side chart).

Zacks Investment Research

Image Source: Zacks Investment Research


This Week’s Reporting Docket

We have more than 200 companies on deck to report results this week, including 16 S&P 500 members. Notable companies reporting this week, aside from the aforementioned retailers include Cisco Systems CSCO, Deere & Company DE, Applied Materials AMAT, and others.


The 2022 Q1 Earnings Season Scorecard

We now have Q1 results from 459 S&P 500 members or 91.8% of the index’s total membership. Total earnings for these companies are up +9.9% from the same period last year on +14.8% higher revenues, with 78.4% beating EPS estimates and 74.9% beating revenue estimates.

The comparison charts below put the 2022 Q1 earnings and revenue growth rates for these 459 index members in the context of what we had seen from the same group of companies in other recent periods.

Zacks Investment Research

Image Source: Zacks Investment Research

The comparison charts below show the Q1 EPS and revenue beats percentages for these 459 index members in a historical context.

Zacks Investment Research

Image Source: Zacks Investment Research

The beats percentages were earlier tracking at their lowest levels in recent quarters, but they have notably improved since then.

Looking at Q1 as a whole, with actuals for these 459 index members and estimates for the still-to-come companies, total earnings are expected to be up +9.3% on +13.3% higher revenues.

Excluding the -15.1% decline in Finance sector earnings, the growth rate for the index improves to +17%. On the other hand, the Energy sector has a very robust earnings profile at present, with the sector bringing in +239% more earnings than the year-earlier period on +60.1% higher revenues.

Excluding the hefty Energy sector contribution, earnings for the remainder of the index would be up only +3.3% on +9.9% higher revenues.

Zacks Investment Research

Image Source: Zacks Investment Research

The chart below shows the comparable picture on an annual basis.

Zacks Investment Research

Image Source: Zacks Investment Research

For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report A Stable Earnings Picture Despite the Market Selloff 

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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