When the stores reported first quarter earnings, the preponderance of guidance pointed to slower sales in the second quarter likely based on sales pulled forward into the first quarter due to warm weather. But it could be the case that falling gasoline prices are giving sales a lift in May that could continue through June. According to the latest report from Retail Metrics, retailers are on track to post a comparable store sales gain of 3.6% in May, excluding the negative effect of lost sales at Walgreen Co. (NYSE: WAG) due to its being dropped by pharmacy benefits management firm Express Scripts Inc. (NASDAQ: ESRX).

We looked at a dozen retailers with an eye toward discerning value opportunities for investors: Costco Wholesale Corp. (NASDAQ: COST), Wal-Mart Stores Inc. (NYSE: WMT), Target Corp. (NYSE: TGT), Macy’s Inc. (NYSE: M), Kohl’s Corp. (NYSE: KSS), J.C. Penney Company Inc. (NYSE: JCP), Gap Inc. (NYSE: GPS), Limited Brands Inc. (NYSE: LTD), American Eagle Outfitters Inc. (NYSE: AEO), Abercrombie & Fitch Inc. (NYSE: ANF), The TJX Companies Inc. (NYSE: TJX), and Dollar General Corp. (NYSE: DG).

Costco Wholesale Corp. (NASDAQ: COST) traded at $84.14 and has a market value of around $37 billion. The consensus target price from Thomson Reuters is $86.83 and the 52-week range is $70.22-$92.10. Costco has a dividend yield of 1.3%. The implied upside to the consensus target is just 3%, and we would note that the target is below the 52-week high.

Wal-Mart Stores Inc. (NYSE: WMT) traded at $64.65 and has a market value of around $220 billion. The consensus target price from Thomson Reuters is $65.28 and the 52-week range is $48.31-$64.88 (new high set today). Walmart has a dividend yield of 2.5%. The implied upside to the consensus target is barely 1%, but we would note that the target is still above the 52-week high.

Target Corp. (NYSE: TGT) traded at $56.84 and has a market value of around $38 billion. The consensus target price from Thomson Reuters is $63.65 and the 52-week range is $45.28-$58.95. Target has a dividend yield of 2.1%. The implied upside to the consensus target is 12%, and we note again that the target is above the 52-week high.

Costco Sales

Costco (NASDAQ: COST) continues its extraordinary run as the most successful big-box retailer. Its club membership system has bettered the more traditional store operations of Walmart (NYSE: WMT) and Target (NYSE: TGT). Net sales for the quarter that ended May 6 increased 8% from last year to $21.85 billion. Net sales for the first 36 weeks increased 10% to $65.54 billion. Same-store sales were up 5% for the most recent quarter. Costco’s shares trade at $83.50, up from a 52-week low of $70.22. Costco’s revenue per employee was $569,488, compared to $206,117 for Walmart.

Best IPOs

A quick review of the 25 largest U.S. IPOs ever shows how badly Facebook has done in early trading. Most of the companies on the list have tremendous revenue, traditional business plans that they have been able to freshen, and large profits. Among these are Visa (NYSE: V), UPS (NYSE: UPS), General Motors (NYSE: GM), MetLife (NYSE: MET) and Prudential Financial (NYSE: PRU). The thing that stands out most about the list is how few tech companies it has. Google (NASDAQ: GOOG) is on the list, of course. But most of the companies are financial ones or firms that are manufacturing based. (Data from CapitalIQ.)

Facebook Investigation

The debate over whether some large investors were warned about a revenue downgrade of Facebook (NASDAQ: FB) continues. Several media have carried stories about Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) passing on numbers that showed lowered forecasts for earnings and revenue in the second quarter and the full year. The attorney general of Massachusetts has begun an investigation into whether information was selectively disclosed. Morgan Stanley insists that it was in compliance with all the regulations that set rules for IPO behavior. Even if Morgan Stanley makes its case successfully, the news likely will keep individual investors out of the market. Many of these investors have turned to mutual funds, exchange traded funds and fixed income paper to protect their interests. That behavior has been reinforced by the Facebook IPO.

Douglas A. McIntyre

Same store sales were up 5% for the most recent quarter. Costco’s shares trade at $83.50 up from a 52-week high of $70.22. Costco’s revenue per employees was $569,488 compared to $206,117 for Wal-Mart.

Target and Wal-Mart reported numbers which, although good, where much less robust.

Douglas A. McIntyre

The fall-off of Facebook shares can be traced to a number of things — whether or not they are legitimate. The first is that a some traders believe Morgan Stanley (NYSE: MS) and Facebook decided, at the last minute, to flood the market with stock to raise more money for the social network. There is a rumor that Morgan Stanley cut Facebook revenue forecasts right before the IPO. Major trading issues in the Nasdaq (NASDAQ: NDAQ) system, which delayed orders and rattled investors, might have been another cause. Two days before the IPO, General Motors (NYSE: GM) pulled its ads from Facebook. That seemed to be a bit of revenge, although no one can figure out why. And, perhaps most damaging, analysts attacked Facebook’s inability to make money on its mobile presence, which raised the question of its long-term viability as a growth company.

Zynga faced none of these problems. Its only trouble was being tethered to Facebook because it gets so much revenue from the social network. Facebook’s mobile strategy eventually could effect Zynga, but the balance of the long list of reasons Facebook shares declined really do not apply to the game firm. Zynga‘s shares may have fallen consistently since mid-April, but Wall St. had begun to warm to the company after its recent, better-than-expected earnings. Citigroup (NYSE: C) started coverage of the game firm with a “buy” and a $12 price target.

The Zynga share drop is no different from the reaction traders have when they sell Ford (NYSE: F) because of poor GM earnings, or drop Yum! Brands (NYSE: YUM) when McDonald’s (NYSE: MCD) announces poor earnings. As often as not, two companies in a related sector have very different financial results, for good reasons most of the time. GM has strong sales in China; Ford does not. Yum!’s operations in the U.S. do poorly; America is a stronghold for McDonald’s. Pairings like Walmart (NYSE: WMT) and Target (NYSE: TGT) or Lowe’s (NYSE: LOW) and Home Depot (NYSE: HD) are often not pairs at all. If they really were parallel in almost every way, management skills would make no difference to results.

Zynga and Facebook may trade as a pair, but they are not one.

Douglas A. McIntyre

Lightly followed Sears reported an adjusted EPS loss of -$0.31 for its first quarter, less than half the consensus (three analysts) estimate of an EPS loss of -$0.67. Revenue came in at $9.3 billion, compared with an estimate of $9.15 billion. On a GAAP basis, Sears posted EPS of $1.78.

The gains at Sears are almost entirely due to the dismantling of the company. The company sold $440 million worth of US and Canada leases during the quarter, and is continuing with its plan to spin-off the Outlet and Hometown stores in the third quarter for another gain of $400-$500 million. Sears also closed stores and is planning to spin-off to existing shareholders about 44% of its holdings in Sears Canada, leaving Sears Holdings with a 51% ownership share.

Walmart, far from dismantling itself, touts its 20% growth in operating income from its international operations. That includes its stores in Mexico — ahem. Walmart posted EPS of $1.09 versus an estimate of $1.04, and revenue of $112.3 billion versus a consensus estimate of $110.5 billion. On a constant currency basis, revenue totaled $111.2 billion. Currency transactions cost the company $800 million in the quarter. Walmart guided EPS for its second quarter at $1.13-$1.18, where the consensus had been $1.16.

At Walmart’s US division, operating income rose by 8.1% “due primarily to higher sales, aided by our price investment strategy, our continued focus on productivity and expense management. Walmart U.S. leveraged expenses for the quarter.” Walmart’s short-term borrowing at the end of the quarter totaled $5.8 billion, up from $4.05 billion in the first quarter and much higher than the $3.45 billion in short-term loans in the same period a year ago. The company plans to continue to “leverage expenses” in the coming quarter.

When Target Corp. (NYSE: TGT) reported earnings yesterday it, too, showed a nice gain but the stock price rose less than 1%. J.C. Penney Company Inc. (NYSE: JCP) got slaughtered yesterday for missing estimates, and Home Depot Inc. (NYSE: HD) took its lumps on Monday.

For different reasons, both Sears and Walmart expect to get a share price boost today. No such luck for Dollar Tree Inc. (NASDAQ: DLTR) which met both EPS and revenue forecasts, but guidance for the second quarter came up short, with EPS guided to $0.87-$0.93, below the consensus estimate of $0.95. Another super-discounter, Dollar General Corp. (NYSE: DG) is expected to post EPS of $0.60 on revenue of $3.82 billion when it reports results for its quarter ended in April.

Shares of Sears are up 7.6% in the pre-market this morning, at $54.75 in a 52-week range of $28.89-$85.90. Shares of Walmart are up about 3.5%, at $61.24 in a 52-week range of $48.31-$62.63. Dollar Tree’s shares are getting pummeled, down nearly -6% at $95.30 in a 52-week range of $59.90-$104.08.

Paul Ausick

Some brokerage firms stop taking orders for Facebook shares. (Reuters)

Japan’s gross domestic product rises 3.5% in the first quarter, helped by consumer spending. (Reuters)

President Obama may force more harsh rules on banks after the JP Morgan (NYSE: JPM) loss. (Reuters)

Pinterest raises $100 million. (WSJ)

Some Facebook shareholders will sell $3.5 billion of stock in the initial public offering. The firms include Goldman Sachs (NYSE: GS). (WSJ)

Apple (NASDAQ: AAPL) may launch an iPhone with a larger screen. (WSJ)

Verizon Wireless will cut unlimited data plans when customers upgrade to 4G LTE. (WSJ)

LG Electronics releases its own series of new smartphones. (WSJ)

The Mortgage Bankers Association releases data that shows the percentage of homes in foreclosure has not fallen much in the past two years. (WSJ)

The number of loans in China has fallen, which may hurt the economy. (WSJ)

Japan’s economy grows an annualized 4.1% in the quarter ended in March. (WSJ)

Google (NASDAQ: GOOG) changes the way sites are measured as it tries to cut sites that try to “game” its system. (WSJ)

Walmart (NYSE: WMT) has been tardy in opening new, small stores, which is hurting it in competition with Target (NYSE: TGT) and other retailers. (WSJ)

Coty will use Bank of America (NYSE: BAC) and JP Morgan for its IPO. (WSJ)

JP Morgan’s trading loss could rise 50%. (NYT)

Dish Network (NASDAQ: DISH) releases a DVR that allows viewers to skip ads. (NYT)

The Federal Reserve says it is worried about the eurozone crisis and its effect on the U.S. economy. (FT)

Shell (NYSE: RDS-A) says natural gas prices could surge by 2015 due to demand. (FT)

Douglas A. McIntyre

The unofficial closing bells put the DJIA down more than 33 points to 12,598.63 (-0.26%), the NASDAQ fell nearly 20 points (-0.68%) to 2,874.04, and the S&P 500 fell -0.44% or nearly 6 points to 1,324.81.

There were several analyst upgrades and downgrades today, including Cisco Systems Inc. (NASDAQ: CSCO) raised to ‘overweight’ at Barclays; Patriot Coal Corp. (NYSE: PCX) cut to ‘market perform’ at FBR; Aetna Inc. (NYSE: AET) cut to ‘hold’ at Argus; Baker Hughes Inc. (NYSE: BHI) cut to ‘neutral’ at JPMorgan; and SandRidge Energy Inc. (NYSE: SD) raised to ‘hold’ at Canaccord Genuity.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: 8×8 Inc. (NASDAQ: EGHT) is down -1.5% at $3.86; Chico’s FAS Inc. (NYSE: CHS) is up 4.2% at $15.28; Deere & Co. (NYSE: DE) is down -3.1% at $74.23 (more coverage here); Eagle Materials Inc. (NYSE: EXP) is down -5.2% at $33.13; LiveDeal Inc. (NASDAQ: LIVE) is up 5.9% at $6.14; and Target Corp. (NYSE: TGT) is up 0.7% at $55.49 (more coverage here).

On Thursday we are scheduled to get earnings from Bon-Ton Stores Inc. (NASDAQ: BONT), Dollar Tree Inc. (NASDAQ: DLTR), E-Commerce China Dangdang Inc. (NASDAQ: DANG), GameStop Corp. (NYSE: GME), Jinkosolar Holding Co. Ltd. (NYSE: JKS), Ross Stores Inc. (NASDAQ: ROST), Sears Holdings Corp. (NASDAQ: SHLD), Teekay Corp. (NYSE: TK), and Wal-Mart Stores Inc. (NYSE: WMT).

Other standouts from today include the following stocks:

J.C. Penney Co. Inc. (NYSE: JCP) is down -19.2% at $26.92. The retailer absolutely failed on quarterly results. More coverage here.

Rosetta Genomics Ltd. (NASDAQ: ROSG) is up 263% at $5.88. The medical test making firm will have one of its tests covered by Medicare. There was also a 1-for-15 reverse stock split. More coverage here.

Abercrombie & Fitch Inc. (NYSE: ANF) is down -13.7% at $39.21 after posting a new 52-week low of $38.26 earlier today. The teen retailer badly missed estimates last night.

Stay tuned for Wednesday. St. Louis Fed President James Bullard is giving a speech. We have also noted the following events on the schedule (all times Eastern):

• 8:30 a.m. – New claims for unemployment benefits
• 10:00 a.m. – Philadelphia Fed manufacturing survey
• 10:00 a.m. – E-commerce retail sales
• 10:00 a.m. – Leading indicators
• 10:30 a.m. – EIA weekly natural gas storage report
• 4:30 p.m. – Fed balance sheet and money supply

Your email address

subscribe

terms and conditions

Paul Ausick

Thomson Reuters has estimates of $1.04 EPS and $110.4 billion in revenue.  We worry that currency could be an issue, but that may be the case for this current quarter rather than the quarter-end of April.  Estimates for the coming quarter are $1.16 EPS and $115.31 billion.

Wal-Mart’s stock chart matters immensely here.  The 50-day moving average has acted as significant resistance and that level is currently $59.75.  As it turns out, %59.50 to $59.75 acted as the last floor in February after the prior breakout attempt failed.  It probably does not hurt that Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-B) just raised the stake considerably in Wal-Mart shares.

Options traders are not expecting much of a move on the earnings.  While expiration date is this Friday, the options trades only have an event-pricing of up to about $1.20 or so in either direction.  The stock fell $2.00 after the prior earnings report in February.

Analysts have not abandoned Wal-Mart and the current $59.20 or so price compares to a Thomson Reuters consensus target of $63.82 on the stock.  Wal-Mart yields 2.7% and the 52-week trading range is $48.31 to $62.63.

Keep in mind that Target Corporation (NYSE: TGT) has already report earnings and the stock is up only 0.7% in a late-day reaction.

Sears Holdings Corporation (NASDAQ: SHLD) is also set to report earnings on Thursday but the retailer under Eddie Lampert and friends is thinly followed by the analyst community.  Of the few estimates (literally three estimates) from Thomson Reuters we see a “consensus” of a loss at -$0.67 EPS on $9.15 billion in sales.  Sears shares are down 3.2% around $51.25 late on Wednesday ahead of the report and that is against a 52-week range of $28.89 to $85.90.  Keep in mind that Sears shares are down from $65.00 as recently as May 1 but the price the day before (April 30) was only $53.78.  Volatility rules the roost here, and maybe the short interest of 10.55 million shares too (over 8-days to cover ratio).

Another more broad issue is that The Home Depot, Inc. (NYSE: HD) stubbed its toe this week as the stock is down by more than 2% from its pre-earnings level.  Investors were hoping that it is doing better along with a slight housing recovery or bottoming-out.  Its stock was initially down about 3% closer to $48 after the earnings report against a 52-week trading range of $28.13 to $52.88.

Thursday is set up to be an interesting day for large retail earnings.  Wal-Mart could be a wild card in either direction.

JON C. OGG

Target posted EPS of $1.04 for the quarter, compared with a consensus estimate of $1.01. Revenue totaled $16.87 billion, slightly better than the consensus estimate of $16.85. For the current quarter, the company forecast EPS of $0.94-$1.04, versus a consensus estimate of $0.99. For the full fiscal year, Target raised its EPS forecast from $4.05-$4.25 to $4.10-$4.30, versus a consensus estimate of $4.28.

Response to the company’s results have been a bit muted because just last month the company forecast EPS of $1.04-$1.10, and today’s report came in at the low end of that range. And the company’s revenues were just barely better than expected, a sign perhaps that profits will be a little harder to generate from the store’s lower-income customers who could desert Target if the company raises its prices.

Walmart is expected to post EPS of $1.04 on revenue of $110.5 billion when it reports results tomorrow. The company is likely to do all it can to post the best possible numbers in an effort to put the Mexican bribery scandal in a much less prominent place than it now occupies.

Costco is expected to post EPS of $0.87 on revenue of $22.14 billion next week. The warehouse retailer has a forward P/E of 19.38, compared with Walmart’s 11.28 and Target’s 11.49, indicating that shares are about fully valued. Costco’s same-store sales reports for the past couple of months significantly better than year-ago sales, and analysts responded by leaving the EPS estimate unchanged. Target’s estimated EPS rose by $0.05 since last month, on its better-than-expected same store sales.

Target’s shares are up 1.7% after the first hour of trading this morning, at $56.04 in a 52-week range of $45.28-$58.95.

Paul Ausick

The unofficial closing bells put the DJIA down more than 63 points to 12,632.08 (-0.50%), the NASDAQ fell nearly 9 points (-0.30%) to 2,893.76, and the S&P 500 fell -0.57% or nearly 8 points to 1,330.66.

There were several analyst upgrades and downgrades today, including Amazon.com Inc. (NASDAQ: AMZN) raised to ‘outperform’ at Credit Suisse; Applied Materials Inc. (NASDAQ: AMAT) cut to ‘hold’ at Needham; Colgate-Palmolive Co. (NYSE: CL) raised to ‘buy’ at Argus; McDonald’s Corp. (NYSE: MCD) cut to ‘neutral’ at Cowen; and Phillips 66 (NYSE: PSX) started as ‘buy’ at Citigroup.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Renren Inc. (NYSE: RENN) is up 5.5% at $5.79; Agilent Technologies Inc. (NYSE: A) is up XX% at $XX; A123 Systems Inc. (NASDAQ: AONE) is up 4.5% at $40.63; Arctic Cat Inc. (NASDAQ: ACAT) is down -10.6% at $37.84; Dick’s Sporting Goods Inc. (NYSE: DKS) is up 6.8% at $50.45 after posting a new 52-week high of $51.65 earlier today; Saks Inc. (NYSE: SKS) is down -0.5% at $10.00; TJX Companies Inc. (NYSE: TJX) is up 7.1% at $42.50; Valspar Corp. (NYSE: VAL) is down -6.7% at $46.45, and The Home Depot Inc. (NYSE: HD) is down -2.6% at $48.61 (more coverage here).

On Wednesday we are scheduled to get earnings from 8×8 Inc. (NASDAQ: EGHT), Abercrombie & Fitch Co. (NYSE: ANF), Chico’s FAS Inc. (NYSE: CHS), Deere & Co. (NYSE: DE), Jack in the Box Inc. (NASDAQ: JACK), and Target Corp. (NYSE: TGT).

Other standouts from today include the following stocks:

Facebook Inc. (soon to be NASDAQ: FB) raised its IPO price range from from $28-$35 to $34-$38. It is possible the world will regain its balance following the company’s IPO, expected for Friday. But maybe not.

Patriot Coal Corp. (NYSE: PCX) is down -18.8% at $3.92 after posting a new 52-week low of $3.91 earlier today. The coal miner lowered shipment and price expectations this morning. More coverage here.

JPMorgan Chase & Co. (NYSE: JPM) is up 1.7% at $36.39. CEO Jamie Dimon dodged a bullet at today’s shareholder meeting and kept both his jobs.

Stay tuned for Wednesday. St. Louis Fed President James Bullard is giving a speech. We have also noted the following events on the schedule (all times Eastern):

• 7:00 a.m. – Mortgage Bankers Association purchase applications
• 8:30 a.m. – Housing starts
• 10:30 a.m. – EIA weekly petroleum status report
• 2:00 p.m. – FOMC minutes released

Your email address

subscribe

terms and conditions

Paul Ausick