A Close Look At Wednesday’s Key Market Events (Update)
$TGT, $WMT, $AMZN
Wednesday’s market focus will be on the latest earnings results and outlook from retailer Target and the New Home Sales report for January.
I. Target (NYSE:TGT) Earnings Report before the open
Note: Target Corp. reported its Q-4 financial results before the opened Wednesday. The company had EPS of 1.52 on $21.6-B in revenue, which compares to consensus estimates of EPS 1.54 on revenue of $21.75-B. In the same frame of last year, the retailer posted EPS of 1.50 and $21.75-M in revenue. Missed
Why it is important
- Target generates 100% of its revenue from the United States, so it will provide market insight on the US consumer’s spending behavior
- Target’s stock, which is up 1.7% YTD, has exhibited relative strength in Y 2016 due in part to its lack of international exposure. That outperformance suggests there are high expectations that its operating results will underscore the benefit of not having international sales exposure.
- Target’s report will provide a basis for comparison between it and Wal-Mart (NYSE:WMT), which recently disappointed investors with its US performance and outlook
- Investors will gain some perspective on the competitive inroads Amazon.com (NASDAQ:AMZN) might have made against Target during the Holiday selling season
What Target said after itsQ-3 report in November
- Sees Q-4 EPS, excluding non-recurring items, of 1.48 to 1.58 Vs 1.49 a year ago
- Sees Q-4 comparable store sales up 1% to 2%, with digital growth of 20%
- Expects full-year adjusted EPS of 4.65 to 4.75 Vs prior guidance of 4.60 to 4.75
What is in play?
Target (NYSE:TGT)
Peer group companies
- Amazon.com (AMZN)
- Best Buy (BBY)
- Costco (COST)
- CVS Caremark (CVS)
- Home Depot (HD)
- J.C. Penney (JCP)
- Kohl’s (KSS)
- Kroger (KR)
- Lowe’s (LOW)
- Macy’s (M)
- Sears (SHLD)
- Walgreens Boots Alliance (WBA)
- Dollar General (DG)
- The Gap (GPS)
- Rite Aid (RAD)
- Staples (SPLS)
- The TJX Companies (TJX)
Notable suppliers
- Cherokee (CHKE)…royalty revenue from Cherokee brand at Target accounted for more than 40% of FY 2015 consolidated revenue
- JAKKS Pacific (JAKK)… Target accounted for 15.3% of net sales in Y 2014
- Hanesbrands (HBI)… Target accounted for 17% of net sales in Y 2015
- Helen of Troy (HELE)… Target accounted for 9% of net sales in FY 2015
- Mattel (MAT)… Target accounted for 8.3% of net sales in Y 2014
- Hasbro (HAS).. Target accounted for 8.0% of net sales in Y 2014
II. New Home Sales Report for January, 10:00a EST
Note: New Home Sales in January hit an annualized rate of 494,000, which was below the un-revised December rate of 544,000, and less than the 523,000 that was expected by consensus. Missed
Why it is important
- While new home sales account for a small portion of total home sales, there is some economic value in this report as new home sales are seen as a leading indicator for the economy
Note: Existing home sales are counted when the sale of the property actually closes - New home sales activity contributes to market expectations for homebuilding companies
- New home construction creates jobs and spending on building materials, the report offers the market some insight on the potential multiplier effect of new home construction
- Existing home sales increased 0.4% in January after rising 12.1% in December. Participants will be interested to see if new home sales can increase again after surging 10.8% in December to a seasonally adjusted annual rate of 544,000.
A closer look
The Numbers
Est Cons Prior
New Home Sales 10:00a EST 519-K 523-K 544-K
What is in play?
Homebuilding Stocks
- Toll Brothers (TOL)
- Pulte Homes (PHM)
- Lennar Corp (LEN)
- Ryland Group (RYL)
- NVR Corp (NVR)
- DR Horton (DHI)
- Hovnanian (HOV)
- KB Home (KBH)
- Standard Pacific (SPF)
Homebuilding ETFs
- iShares U.S. Home Construction (ITB)
- SPDR S&P Homebuilders ETF (XHB)
Home improvement retailers
- Home Depot (HD)
- Lowe’s (LOW)
Consumer Discretionary Select Sector SPDR (XLY)
III. Economic Reports
Wednesday early, this economic report is scheduled to be released to the market: 1) MBA Mortgage Index (Consensus N/A).
Note: MBA Mortgage Index for the week ending 20 February: Actual -4.3% W-W, Prior +8.2% W-W
IV. Earnings Reports
Wednesday early these companies are scheduled to report earnings to the market: HAWK, MSA, UCTT, ATRC, EIX, GNMK, JBT, PEI, RUBI, SLCA, SM, STLY, VRSK, EXR, HLS, KRA, ROIC, EHTH, FIX, FSLR, CAR, TTPH, ENPH, ETSY, FIVN, FMI, NYMT, ORA, PZZA, RP, TX, WBMD, WTR, XXIA, Y, ARC, BNFT, CVG, DXCM, EXAM, MATX, PRA, SF, TROX, WMGI, XENT, ABCO, ALDR, BBRG, CONE, DWA, INFI, MASI, PGRE, CZR, JAZZ, HCKT, PLKI, TGB, PRSS, CPRT, DY, FCE.A.
Stay tuned…
Paul Ebeling
HeffX-LTN
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