Earnings playbook: The investing game plan as retail giants Walmart and Target wrap up the season
In other words, it has been a solid season. However, key consumer names such as Walmart and Target are still on deck, and they will give investors another indication of how well Main Street is grappling with higher prices. Take a look at CNBC Pro’s breakdown of what’s expected from this week’s biggest reports.
Tuesday Walmart is set to report earnings before the bell, followed by a conference call at 8 a.m. ET. Last quarter: WMT said higher costs, supply chain troubles and high inventories ate away at profits .
This quarter: Analysts surveyed by Refinitiv expect a slight increase in year-over-year revenue along with a single-digit slide in earnings per share. What CNBC retail reporter Melissa Repko is watching: “Walmart already sent a clear signal that customers are feeling inflation. Last month, the company cut its second-quarter and full-year profit outlook and said it’s having a tougher time selling high-margin discretionary items such as apparel.
Investors will listen for the retailer’s plan to grow profits in a more challenging environment, such as using private labels to win more wallet share from budget-conscious shoppers or leaning into new revenue streams like its ads business.” What history shows: Walmart earnings days lately have been rough for investors with the shares falling following 7 of the last 9 reports, according to Bespoke data. Home Depot is set to report earnings before the opening bell, with management slated to hold a call at 9 a.m. ET.
Last quarter: HD raised its full-year outlook after posting record first-quarter sales . This quarter: The home improvement retailer is expected post high single-digit earnings growth, Refinitiv data shows. What CNBC reporter Jack Stebbins is watching: “As a go-to spot for home builders, electricians and other professionals, Home Depot is more insulated from changes in consumer spending.
On top of that, those pros had a backlog of business after the pandemic. The dynamic also puts the company in a better spot than other retailers when it comes to inflation. Still, investors will look for clues on how Home Depot is navigating this tough environment, especially as inflationary pressures remain near 40-year highs.” What history shows: Home Depot beats earnings expectations 85% of the time, according to Bespoke.
However, the stock only averages a 0.32% gain on earnings days. Wednesday Target is set to report earnings in the premarket, with a conference call slated for 8 a.m. ET.
Last quarter: TGT said high cost and inventory troubles hit profits . The stock fell 25% that day. This quarter: Target earnings are expected to have fallen sharply from the year-earlier period, while revenue is forecast to be roughly flat, according to Refinitiv.
What CNBC retail reporter Melissa Repko is watching: “Target has seen a sharp reverse of fortunes, as it has swung from red-hot consumer demand to a glut of unwanted inventory. The discounter said earlier this summer that it would take a profit hit in the second quarter, so it cleared shelves ahead of the all-important back-to-school and holiday seasons. Its leaders are expected to give a progress update on that effort and shed light on how sales are holding up as many customers spend more on services like travel and dining out, along with feeling inflation pressures.” What history shows: Buckle up for these results.
Following the last three reports, Target shares have dropped 25%, popped 9% and fallen 5% respectively, according to Bespoke. Lowe’s is set to report earnings before the bell. Management is scheduled to hold a call at 9 a.m.
ET. Last quarter: LOW reported a sales decline as cool spring temperatures dented demand for outdoor products . This quarter: Lowe’s earnings are expect to have grown slightly year over year, according to Refinitiv.
What CNBC reporter Jack Stebbins is watching: “With about 75% of its sales coming from do-it-yourself customers, Lowe’s is at risk of feeling pinched by declining consumer confidence. The home improvement retailer is coming off of spring, the peak season for projects. However, the backdrop has gotten tougher as people juggle busier schedules and tighter budgets and see signs that the housing market may be cooling .” What history shows: Lowe’s has beaten expectations for the last six quarters, FactSet data shows.
Cisco Systems is set to report earnings after the bell. Corporate leadership is expected to hold a call at 4:30 p.m. ET.
Last quarter: CSCO forecast a revenue decline , putting pressure on the stock. This quarter: Analysts surveyed by Refinitiv expect slight year-over-year declines in Cisco’s earnings per share and revenue. What CNBC tech reporter Jordan Novet is watching: “Analysts aren’t particularly enthusiastic about Cisco at the moment, with more than half of the 29 analysts FactSet surveyed maintaining a hold rating on the data center networking-hardware maker’s stock. ‘We do not think a premium valuation is warranted now because, despite the company’s stated goal of increasing Software and recurring revenues, Cisco has not been very successful in attaining its business transformation targets,’ analyst Mike Genovese at Rosenblatt Securities wrote as he initiated coverage with a hold rating in mid-July.
Management warned of a revenue decline for the July quarter. Since then, one of Cisco’s top executives, Todd Nightingale, leading the charge in enterprise networking and cloud, agreed to be CEO of content-distribution network operator Fastly. Another executive vice president, Jonathan Davidson, has agreed to take on the additional responsibility of running that unit, a spokesperson said.” What history shows: Cisco shares average a loss of 0.4% on earnings days, however, the company beast earnings expectations 94% of the time, Bespoke data shows.
Thursday Kohl’s is set to report earnings before the bell, with a call slated for 9 a.m. ET. Last quarter: KSS slashed its full-year outlook after an earnings miss .
This quarter: Kohl’s earnings are expected to have fallen by more than 50% from the year-earlier period, according to Refinitiv. What CNBC retail reporter Lauren Thomas is watching: “Kohl’s in June slashed its outlook for the fiscal second quarter, which the retailer is about to report, citing softened consumer spending. Industry watchers are looking for any updates to its full-year view, coming on the heels of many retailers including Walmart and Warby Parker lowering their forecasts in recent days amid inflationary pressures and ongoing supply chain headwinds.
Kohl’s also earlier this summer ended deal talks with The Vitamin Shoppe owner Franchise Group. It has faced ample pressure from activists to sell the business and could offer updates this week.” What history shows: Kohl’s has surprisingly been on an earning roll lately, gaining after each of its last four reports, according to Bespoke data. But this has not been the long-term trend.
Typically the shares average a decline on earnings days, according to Bespoke.