How To Finish Earnings Season on A High Note

Earnings season may be wrapping up this week, but the last push is going to be an important one. Over the next five days, about 400 companies are reporting earnings, 42 of which are in the S&P 500. Along with the usual small- and mid-cap rush late in the season, plenty of large-cap companies have yet to announce results, especially in restaurants and in retail. Now I’m still bullish about several retail and consumer-driven stocks—despite the doom and gloom scenarios predicted by the media. So I expect more earnings announcements like what we saw from the big box retailer last week. Just take a lot at what analysts are saying below:

Restaurants

Ticker  Company Earnings Date Forecast Sales Forecast Earnings  My Take
PZZA Papa John’s International Tuesday 13.7% 16.9% Strong Buy
DIN DineEquity Wednesday -33.2% -9.9% Buy
DPZ Domino’s Pizza Inc. Thursday 6.1% 15.4% Buy
BAGL Einstein Noah Restaurant Group Thursday -3.6% 5.6% Buy
WEN The Wendy’s Co. Thursday 4.9% 100.0% Hold

As you can see, Papa John’s International (PZZA) currently has the strongest prospects (note how its forecast sales growth is over double that of competitor Domino’s Pizza (DPZ).  And while DineEquity (DIN)—the owner of International House of Pancakes and Applebee’s International—is headed towards a dip in sales and earnings, I currently have it down at a buy thanks to strong cash flow, return on equity and institutional buying pressure. On the flipside, The Wendy’s Co. (WEN) doesn’t make the grade and that’s because its underlying fundamentals are mixed at best.

Retail

Ticker  Company Earnings Date Forecast Sales Forecast Earnings  My Take
HVT Haverty Furniture Companies Monday 8.3% 91.7% Buy
HD Home Depot  Tuesday 10.5% 28.0% Buy
TGT Target Corp. Wednesday 6.5% 3.5% Buy
TJX  TJX Companies Inc. Wednesday 14.0% 30.6% Buy
GPS Gap Inc. Thursday 8.1% 61.4% Buy
AZO  AutoZone  Tuesday 4.2% 14.7% Hold
RSH RadioShack Tuesday -1.6% -141.7% Hold
BKS Barnes & Noble Thursday -1.5% -23.9% Hold
DLTR Dollar Tree Wednesday 14.6% 23.7% Sell
LTD Limited Brands  Wednesday 6.9% 16.0% Sell
KSS Kohl’s Corp. Thursday 3.5% -9.9% Sell
SHLD Sears Holdings Corp. Thursday -5.8% 81.5% Sell
M Macy’s  Tuesday 6.6% 17.1% Strong Sell
JCP J.C. Penney Co. Wednesday -24.5% -120.3% Strong Sell

In the retail arena, we have several promising earnings announcements coming up—I’m personally banking on strong earnings from Home Depot (HD), TJX Cos Inc. (TJX) and Gap Inc. (GPS). Meanwhile, I want you to steer clear of Sears Holdings Corp. (SHLD), Macy’s Inc. (M) and J.C. Penney Co. (JCP). Lately, department stores have been hard-pressed to grow sales as bargain chains like TJX Co.’s TJ Maxx and Marshall’s have been attracting cost-conscious customers by the droves.

If you hold shares in any of the companies above, please keep these facts in mind as we draw closer to their earnings announcements. Tomorrow, I’m going to dig into a sector that has been on the rise while the dollar has fallen: Commodities. While there are a lot of profit opportunities here, there are also plenty of pitfalls, so please be sure to check back in tomorrow if you have been looking for an effective hedge against the falling dollar.

Sincerely,

Louis Navellier

Louis Navellier

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