5 Top Retail Stocks for the Summer Are Priced Right and Rated Buy

Print Email

McDonald’s earnings were a touch light this quarter, and the Merrill analysts noted this:

McDonald’s reported first quarter 2019 EPS of $1.72, modestly light of $1.75 consensus (all due to the sell-side not reflecting tax guidance). We lower our 2019 EPS by $0.05 on higher G&A and interest expense guidance partially offset by higher comp expectations. We think strong top-line trends should drive an expanding McMultiple despite limited positive near-term earnings revisions.

Where better for busy American families on vacation this summer to stop and get a meal than the golden arches, whose years of familiarity and thousands of locations make it a reasonable and good fast-food experience.

Shareholders receive a 2.35% dividend. The $215 Merrill price target compares with a $214.25 consensus target. The shares were last seen at $198.03.

Target

This is another solid and safe retail total return play, and it also resides on the Merrill Lynch US 1 list of top stock picks. Target Corp. (NYSE: TGT) is one of the largest discount retailers in the United States, operating roughly 1,800 Target stores across the country. The company sells merchandise in its Signature Categories Style, Baby, Kids and Wellness, as well as other products in both physical Target stores and online at Target.com.

Since 2017, Target has poured tons of money into its e-commerce offerings, overhauling its stores and refreshing its inventory to better compete against Amazon. Target has even embraced the same-day delivery concept and is expanding retail floor space for toys as it looks to scoop market share after the closing of Toys “R” Us.

Solid numbers and a very positive analysts day had the Merrill analysts noting that they believe the company’s ability to moderate fulfillment costs through its “stores as hubs” model should drive margin improvement in fiscal 2020. They also feel the valuation is compelling at current levels.

Shareholders receive a 3.39% dividend. Merrill has set its price objective at $100. The consensus target price is just $86.65, and shares closed most recently at $75.41.

Walmart

The giant retailer’s shares have rallied nicely off last December’s lows, but they still have upside. Walmart Inc. (NYSE: WMT) is the world’s largest retailer, operating retail stores under the formats of Walmart Stores, Supercenters, Neighborhood Markets, as well as Sam’s Club locations, in the United States, and it has a growing e-commerce business (including Jet.com). Internationally, Walmart also operates locations in several countries, including Argentina, Brazil, Canada, China, Japan, Mexico and the United Kingdom.

Each week, nearly 260 million customers and members visit the company’s 11,535 stores under 72 banners in 28 countries and e-commerce sites in 11 countries. In addition, the company announced in the summer plans to acquire a 77% stake in India e-commerce retailer Flipkart in a $16 billion debt and cash transaction. The deal dramatically expands Walmart’s presence in India, where online retail is growing quickly and Flipkart is a leader.

Shareholders receive a 2.11% dividend. The Merrill Lynch price target is $120. The consensus target is $108.97, and shares closed at $100.30.

I'm interested in the Newsletter
 

These are five of the biggest retailers continuing to fight the huge online presence of Amazon. Consumers continue to show loyalty to all five, and they may be poised to have a big summer selling season, with consumer confidence continuing to be very solid and earnings looking decent as well.