Strong Retail Earnings Drive Market Confidence Amidst Guidance Woes

Retail earnings have seen substantial growth, with 72% of companies beating EPS estimates. However, Walmart faces scrutiny over its cautious guidance. This report highlights the optimistic outlook while noting the impact of guidance on stock performance.

Date: 27-02-2025

AI Rating: 7

Earnings Performance Overview

The reported earnings cycle has shown promising trends, with more than 90% of companies reporting strong results. Total earnings for 456 S&P 500 companies have increased by +13.6% year-over-year, alongside a +5.5% growth in revenues. Notably, 77.6% of companies surpassed EPS estimates, indicating a robust performance.

Retail Sector Insights

In the Retail sector, which is now a focal point for earnings reports, Q4 earnings surged by +32.3% compared to the previous year, with the same sector posting a +7.0% increase in revenues. It’s essential to recognize that despite Amazon's significant influence, the metrics indicate positive performance for many retailers.

EPS and Revenue Considerations

A significant takeaway is the impressive EPS performance, with 72% of retail-related firms beating their estimates. This signals a strong operational capacity within the sector. However, excluding Amazon's performance, growth rates are adjusted to +4.6% for earnings and +5.4% for revenues. This highlights the importance of major players' contributions to sector performance.

Home Improvement Retailers

Home Depot and Lowe's demonstrated resilience by showing positive comp gains, a sign of recovery after extended periods of decline. Home Depot's positive results, even amidst weak guidance, were favorably received by the market, contributing positively to its share performance. This trend might enhance investor confidence, particularly in the home improvement sector.

Sector Estimate Dynamics

While the Tech sector also indicated a solid +24.6% expected growth in Q4 earnings, recent data suggests a shift in outlook. Cuts to estimates for 15 of the 16 sectors, including Technology, may affect investor sentiment moving forward.

Stocks: WMT AMZN HD LOW