MARKET SNAPSHOT: Retail Earnings To Test Those Consumer Sentiment Highs

By Wallace Witkowski, MarketWatch

SAN FRANCISCO (MarketWatch) -- How recent consumer optimism contributed to the bottom line in the third quarter will start becoming more evident this week as major retailers begin posting financial results for the period.

Stocks had another good week with the Dow Jones Industrial Average (DJI) rising 1.1% and the S&P 500 Index (SPX) finishing up 0.7% to carve out new closing highs, with the Nasdaq Composite Index (RIXF) squeaking by with a less than 0.1% gain.

Consumer sentiment and consumer confidence are at highest levels they've been in seven years as energy prices dropped over the summer, suggesting that retailers could see a big benefit.

It's also those sectors that are carrying the highest forward price-to-earnings ratios with consumer staples at 18.8x and consumer discretionary at 17.8x, according to John Butters, senior earnings analyst at FactSet.

The S&P 500 itself is carrying around an elevated forward P/E ratio of 15.8x. That only becomes "average" if one includes the huge P/Es around the turn of the century into the mix.

The week sees two Dow components reporting: Cisco Systems Inc. on Wednesday and Wal-Mart Stores Inc. on Thursday.

With nearly 90% of the S&P 500 having reported, earnings are projected for growth of 7.6%. Also, this earnings season is seeing the highest percentage of companies topping earnings-per-share estimates since the second quarter of 2010 at 77%, according to FactSet. Then again, those estimates did drop notably during the quarter.

Earnings growth was estimated at 4.6% by the end of the third quarter, which makes the current growth seem pretty good. When the quarter started, however, earnings had been expected to grow by 9.5%, according to FactSet data.

Notable companies reporting earnings this week

 
Report Date Company/Ticker (FactSet estimated EPS / revenue) 
Nov. 10     Rackspace Hosting Inc.   (16 cents / $458.3 million)Sotheby's  (loss of 38 cents / $91.3 million) 
Nov. 11     Fossil Group Inc.  ($1.82 / $878.5 million)D.R. Horton Inc.  (48 cents / $2.42 billion)Beazer Homes USA Inc.  ($1.10 / $503.2 million)J.C. Penney Co.  (loss of 81 cents / $2.81 billion) 
Nov. 12     Cisco  (53 cents / $12.16 billion)Macy's Inc.  (51 cents / $6.35 billion)Rockwell Automation  ($1.82 / $1.8 billion)NetApp Inc.  (69 cents / $1.55 billion)ADT Corp.  (48 cents / $878.5 million) 
Nov. 13     Wal-Mart  ($1.12 / $118.36 billion)Nordstrom Inc.  (72 cents / $3.11 billion)Kohl's Corp.  (74 cents / $4.41 billion)Viacom Inc.  ($1.68 / $3.9 billion)Applied Materials Inc.  (27 cents / $2.26 billion)Tyco International Ltd.  (56 cents / $2.72 billion) 
 
 

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