With all the volatility of earnings season, it's refreshing to see some companies doing well... Walmart (WMT) reported earnings on November 15. And it went better than expected...
Editor's note: Our Chaikin Analytics offices will be closed this Thursday and Friday for the Thanksgiving holiday. Because of that, we won't publish Chaikin PowerFeed. Our normal publishing schedule will resume on Monday, November 28. Enjoy the long weekend...
My Favorite Warehouse Retailer's Outlook Is Strong
By Karina Kovalcik, senior quantitative analyst, Chaikin Analytics
With all the volatility of earnings season, it's refreshing to see some companies doing well...
Walmart (WMT) reported earnings on November 15. And it went better than expected...
The retail giant's comparable U.S. sales rose 8.2% over the past year. It mentioned strong sales in groceries, store brands, and seasonal items. And it also raised its sales outlook.
As a result, its stock gained around 7% that day.
Then, before the markets opened on November 17, Macy's (M) reported earnings...
In the third quarter, Target's (TGT) profits fell about 50% year over year. And the company warned of a soft fourth quarter. The stock plunged 13% after the November 16 report.
So today, let's look at why Walmart's report is a critical piece of data. It could give us a hint about what to expect when my favorite warehouse retailer reports in a couple weeks...
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Importantly, Walmart reported increased foot traffic in the third quarter. In its earnings report, it cited a 2.1% rise in the number of shoppers over the previous quarter.
That's always good. More visitors increase the likelihood of more sales.
I already mentioned Walmart's year-over-year sales gain earlier. And by looking at where a big chunk of that increase came from, we can focus on an interesting tidbit...
In short, sales in the Sam's Club division jumped 10% year over year. Growth like that in a major division is great to see. It's a strong indicator that the entire market segment is doing well.
And it bodes very well for my favorite warehouse retailer – Costco Wholesale (COST).
In other words... if the trend holds, Costco should produce a good financial report as well.
But a good financial report isn't the only thing that matters...
Guidance is also a key factor in a stock's performance after an earnings report. That relates to whether the company believes the previous trends will continue going forward or not.
And as I said, Walmart just raised its guidance. That's an important development, too...
We're still in an uncertain economic environment today. So when a company as big as Walmart is optimistic moving forward, it's a great sign for other retailers like Costco.
In the end, as always, we can use the Power Gauge as our guiding light...
The system just flipped to a "bullish" overall ranking for Costco this week. It's also "bullish" in the Earnings category. That's the factor group we're trying to hone in on with this essay.
So our takeaway is simple...
Keep your eye on Costco's December 8 earnings report. This stock could be ready for a big move higher.
Good investing,
Karina Kovalcik
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+1.16%
12
16
2
S&P 500
+1.32%
163
260
76
Nasdaq
+1.44%
32
49
19
Small Caps
+1.10%
621
851
412
Bonds
+1.42%
Energy
+3.13%
11
12
0
— According to the Chaikin Power Bar, Large Cap stocks and Small Cap stocks are Bullish.. Major indexes are mixed.
* * * *
Top Movers
Gainers
BBY
+12.78%
A
+8.07%
CF
+6.72%
EQT
+5.93%
FIS
+5.90%
Losers
DLTR
-7.79%
ROL
-6.12%
MDT
-5.30%
JBHT
-2.66%
DXCM
-1.46%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
DE
No earnings reporting today.
Earnings Surprises
BBY Best Buy Co., Inc.
Q3
$1.38
Beat by $0.36
VMW VMware, Inc.
Q3
$1.47
Missed by $-0.13
ADI Analog Devices, Inc.
Q4
$2.73
Beat by $0.14
DLTR Dollar Tree, Inc.
Q3
$1.20
Beat by $0.02
MDT Medtronic plc
Q2
$1.30
Beat by $0.02
* * * *
Sector Tracker
Sector movement over the last 5 days
Staples
+3.25%
Utilities
+2.56%
Health Care
+2.04%
Materials
+1.31%
Financial
+1.13%
Industrials
+0.93%
Real Estate
+0.86%
Information Technology
-0.30%
Energy
-0.91%
Communication
-1.40%
Discretionary
-2.92%
* * * *
Industry Focus
Homebuilders Services
10
23
2
Over the past 6 months, the Homebuilders subsector (XHB) has outperformed the S&P 500 by +3.59%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #9 of 21 subsectors.
Top Stocks
OC
Owens Corning
FBHS
Fortune Brands Home
LOW
Lowe's Companies, In
* * * *
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