Wave Of Solid Q2 Results Boosts Retail ETFs

Retail has been the hottest sector lately. The overall strength of the sector can be attributed to strong corporate earnings coupled with higher consumer spending and a booming economy. Total earnings from 85.1% of the sector’s total market capitalization reported so far are up 34.9%% on 9.7% higher revenues, with 91.7% of the companies beating on earnings and 75% exceeding top-line estimates.

Both the growth rates and beat ratios are encouraging, given that these are tracking above the historical periods. Positive share price response from Wal-Mart (WMT - Free Report), Target (TGT  - Free Report), Nordstrom (JWN - Free Report), and Kohl’s (KSS - Free Report) offset negativity of some weak results or decline in share price at J.C. Penney (JCP - Free Report), Macy’s (M - Free Report), and Home Depot (HD - Free Report) .

Let’s dig into the details of the earnings releases:

Earnings Sending Stocks Higher

The world's largest retailer, Wal-Mart, rallied 6.6% in response to the earnings announcement. It surpassed earnings and revenue estimates by 8 cents and $2.3 billion, respectively. Additionally, the company recorded the strongest growth in more than a decade in sales at established stores and raised its earnings per share guidance to the range of $4.90-$5.05 from $4.75-$5.00 for the full fiscal year.

Specialty retailer, Nordstrom emerged as the real champion in the Q2 earnings season as the stock gained 7.3% in response to earnings announcement. The company beat the Zacks Consensus Estimate for earnings by 11 cents and for revenues by $80 million. It also raised its earnings per share guidance to $3.50-$3.65 from $3.35-$3.55 and revenue guidance to $15.4-$15.5 billion from $15.2-$15.4 billion.

Big-box retailer, Target, rose 5% to an all-time high in response to its best quarterly results in more than a decade. The company topped the Zacks Consensus Estimate by 7 cents for earnings and by $441 million for revenues. It raised its earnings estimate from 90 cents to $1.00-$1.20 for the third quarter and from $5.15-$5.45 to $5.30-$5.50 for the fiscal full year.

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