Lo, Donald Trump was elected to the highest office in the land, and there was much weeping and gnashing of teeth. The heavens opened, blood rained from the sky, and … then the Dow Jones industrial average ran out to all-time highs.
For now, it appears like the market is back to business as usual despite Trump’s election shocker, and that means earnings are once again back in the spotlight. The tech sector is mostly wrapping things up, and we’re now transitioning to a healthy slate of retail reports.
Here’s a look at this week’s featured companies:
Wal-Mart Stores (WMT). If Wal-Mart has a theme for 2016, it’s “the comeback.” Wal-Mart entered the year trying to recover from 30 percent losses in 2015. And while WMT has more than doubled the market in 2016, it has done so despite a couple precipitous drops.
[See: What 8 CEOs Are Saying About Donald Trump’s Victory.]
The most recent setback was in early October, when Wal-Mart reiterated its expectations for the current fiscal year’s earning. Wal-Mart said the 2018 fiscal year would be flat and guided 2019 at 5 percent profit growth — both projections lower what the company estimated at last year’s investor day, a disaster that sent WMT stock to its worst-ever single-day loss.
Wal-Mart is playing the long game now, diverting more of its capital expenditures into store remodels, distribution centers and e-commerce improvements, and pulling back on store openings. Still, WMT is building a head of steam in its operations, putting together its biggest gain in same-store sales in four years back in the second quarter.
WMT reports Thursday before the bell, and Wall Street is expecting a 3 percent decline in earnings to 96 cents per share on a 1 percent revenue bump to $118.6 billion. Barclays, which is projecting a cent more in earnings for the third quarter, sees new shoppers and better current-customer spend being a potential catalyst for the quarter, though food deflation and discount competitors could hold Wal-Mart back.
Target Corp. (TGT). Wal-Mart rival Target is hoping for a comeback of its own, too — into the black this year. TGT shares are off a couple percent in 2016, hampered by a host of issues.
The highest-profile black mark hampering Target was the fallout after it implemented a transgender-friendly policy for its bathrooms — a response to a North Carolina law that made it illegal to use a restroom that doesn’t match a person’s birth identity.
While sales have declined in the two quarters since then, Target has blamed a number of other issues, such as weaker consumer spending on smaller discretionary purchases amid higher spending on bigger items like homes. TGT also is without the revenues from its pharmacy business, which it sold to CVS Health Corp. ( CVS) at the end of last year.
Target itself set the bar low for the third and fourth quarters, predicting comps would come in flat to 2 percent lower, down from single-digit growth projections. It also guided third-quarter earnings at 75 to 95 cents per share. At the time, the high end just met expectations, but the bar has since slipped to 83 cents per share — a 3 percent-plus decline. A big sales drop is in the cards again, too, with analysts expecting a 7.5 percent decline to $16.4 billion.
[Read: Stock Market Showdown: Target vs. Wal-Mart.]
A limbo-low bar gives Target a good chance to beat. But how much higher will investors be willing to send TGT stock, which has soared more than 7 percent in the Trump rally?
Best Buy Co. (BBY). Best Buy has enjoyed a fruitful 2016, running up more than 50 percent from its early-year lows. The retailer’s financial situation is improving, and it even registered same-store sales growth for the second quarter against negative trends, such as deep declines in entertainment (video and audio) spending.
But Thursday’s report could be difficult. Best Buy faces some lofty expectations, including 15 percent earnings growth to 47 cents per share. Revenues are estimated to improve 0.4 percent to $8.85 billion — modest, but another encouraging reversal after the past couple years.
You could say that BBY is destined for a disappointment selloff, even if it manages to slightly beat. Evercore just went negative on Best Buy ahead of earnings, downgrading the stock from “hold” to “sell,” as it cites broader headwinds conspiring against the company in 2017.
Still, Virtus Investment Partners’ Joe Terranova remains a believer. “When you have a stock that in the last year has gone from $25 to basically $38, you have to acknowledge there’s some form of fundamental turn,” he says.
Home Depot (HD). Home Depot has been a frustrating holding for roughly a year now, but that could change — at least in the very short-term future.
Earnings should be just fine; they almost always are. HD has beaten or at least met estimates for years, with consistent growth always in tow. As America’s housing industry runs with tireless legs, so do Home Depot’s quarterly results. In the second quarter, for instance, HD’s revenues grew 6.6 percent on 5.4 percent comps improvement.
Expectations haven’t cooled down much for the third quarter, with Wall Street looking for 5.7 percent revenue growth to $23.05 billion, and 16 percent earnings growth to $1.58 per share. Should Home Depot beat on that front — and it should, thanks to a push toward professional customers — it will be continue to be among the best operational performers in retail.
While HD isn’t exactly a bargain at 18 times forward earnings estimates, and a yield of 2.1 percent isn’t doing much better than the T-note, the company is trailing the broader market and in fact is off 2 percent this year. Another quarter of financial quality should renew interest in this underappreciated blue-chip.
Cisco Systems (CSCO). Last up is Cisco, which reports its fiscal first-quarter earnings after Wednesday’s bell, and will be trying to extend its own strong performance of 15 percent year-to-date.
The key to this one will be simply beating expectations of stagnation.
Analysts expect flat earnings of 59 cents per share on a revenue decline of 3 percent year-over-year. That reflects a continuing lack of significant growth in its core switching products, as well as struggles for its NGN Routing segment.
That’s why Cisco engaged in its hallowed tradition of announcing layoffs along with its fourth-quarter results back in August. CSCO said it would be reducing its workforce by 5,500 people, and driving the savings into next-gen datacenter, cybersecurity and other areas in hopes of sparking growth.
[See: 20 Awesome Dividend Stocks for Guaranteed Income.]
Those plans, however, are for the future. For this week, an earnings beat looks very doable, and investors should want to see Cisco maintain momentum in its security and wireless divisions.
More from U.S. News
8 Ways President Donald Trump Will Affect Wall Street
9 ETFs to Buy When the Market Tanks
9 Stocks to Buy for the Aging Baby Boomer Market
Earnings Preview: Wal-Mart Stores (WFM) and Target Corporation (TGT) originally appeared on usnews.com
