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Retail In Focus As US Earnings Wind Down

The US earnings season continues to wind down this week, with around 10 S&P 500 companies expected to report results and most of those will be retailers, led by the giant Walmart.

Department store chain, Macy’s kicks things off when it reports its quarterly results on Wednesday. Walmart is the next day.

Morgan Stanley analysts downgraded the stock last Thursday citing “ongoing negative store comps (comparisons) and continued decline in return on invested capital (ROIC)” and also said they are “cautious” on the sector as a whole.

Walmart — the world’s largest retailer, which renewed its bet on India this week with a $US16 billion investment in Flipkart to take on rival Amazon — is down to report results on Thursday.

Walmart is also restructuring its UK interests, selling Asda to rival Sainsbury’s in exchange for a large minority stake in the new company.

Nordstrom, Dick’s Sporting Goods, Home Depot, JCPenney are among the other major retailers reporting this week.

Farm machinery and construction products group, Deere & Co is another down to report this week.

Meanwhile US analysts note that as solid as the March quarter earnings season has been there has been few companies really bullish about their second quarter outlooks.

“There has not been any incremental improvement in the earnings outlook relative to what was expected ahead of the start of this earnings season,” said Sheraz Mian, director of research at Zacks told Marketwatch.com.

“We see this in the underwhelming revisions trend for the 2018 Q2 quarter, which is in contrast to the very positive revisions trend we saw ahead of the start of the Q4 earnings season.”

So far, 444 S&P 500 companies have posted earnings and the index is showing earnings growth of 24.5% from the same period a year ago and 9.3% growth in revenues.

Zacks says that almost 78% of those companies beat per-share earnings-per-share estimates, while 75% beat revenue estimates.

But as Mian notes, these gains were widely expected in most sectors (autos is an exception), after a solid of a fourth quarter, when estimates were revised to reflect the benefits of the tax revamp that was signed into law in December.

“The fact is that the earnings picture had been steadily improving since the second half of 2017 and in some respects the 2017 Q4 earnings season was actually a lot stronger than what we saw companies report this earnings season,” he told Marketwatch.

“Disappointingly, we are not seeing that with estimates for Q2, as the above chart shows,” said Mian. “In other words, the growth picture coming out of this earnings season is very impressive, but there is no improvement in expectations for the current and coming quarters,” he pointed out.

In Australia, a trio of reports - with half years from Dulux the paint group, Elders and Australian Agricultural Co.

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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