With 61% of the Zacks Retail and Wholesale sector stocks beatings earnings expectations, there are quite a few companies investors may want to start paying attention to.
The sector is currently home to several top-ranked Zacks Industries consisting of companies that provide food, drugs, internet commerce, consumer electronics, restaurants, apparel/shoes, and jewelry.
Let’s take a look at three highly-ranked retail stocks that investors should strongly consider buying.
Dillard’s DDS
Department store operator Dillard’s Inc (DDS) was added to the Zacks Rank #1 (Strong Buy) list this week after recently crushing its fiscal Q3 earnings expectations. Earnings estimate revisions have started to rise following the company’s impressive Q3 results. DDS posted a 125% earnings surprise with EPS at $10.86 per share, up 12% from Q3 2022.
Along with its fashion apparel and home furnishing department chains that coincide with its website the company owns a real estate investment trust (REIT), and a wholly-owned captive insurance company. This diversification has helped manage risks more efficiently and improve liquidity which has contributed to the stock holding up far better than the broader market and most retail and regional department stores this year.
As we approach the holiday shopping season Retail-Regional Department Stores is currently in the top 8% of over 250 Zacks Industries. Dillard’s earnings are now expected to rise 3% in its fiscal 2023 to $41.39 a share.
Earnings estimates for FY23 are largely up after DDS beat Q3 expectations. Fiscal 2024 earnings are expected to drop -39% after a very tough-to-follow year. However, FY24 earnings estimates have also trended higher over the last 30 days to $25.10 per share compared to $22.83 a share.
Year to date, DDS is now up an outstanding +53% to crush the S&P 500’s -18% and blast the Retail-Regional Department Stores Markets -7%. Dillard’s performance has been stellar as it continued to cement itself as a retail leader over the last two years up an impressive +723% when including its dividend to easily beat the benchmark and its Zacks Subindustry’s +121%.
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Despite the stellar run, DDS has remained fairly valued considering its exponential growth and massive earnings. Trading around $375 per share, DDS has a forward P/E of 8.7X. This is on par with the industry average. Even better, DDS still trades at a discount to its decade-high of 45.8X and is nicely below the median of 12.3X.
TravelCenters of America TA
TravelCenters of America (TA) is a name in the Zacks Retail-Convenience Stores Industry that investors should consider buying. The industry is currently in the top 2% and TA sports a Zack Rank #1 (Strong Buy) with EPS estimate revisions rising.
The company operates as a full-service national travel center chain in the U.S., with nationwide locations serving hundreds of thousands of professional drivers and other highway travelers each month.
TA earnings are expected to climb 120% to $9.03 a share in 2022, based on Zacks Estimates. Fiscal 2023 earnings are expected to decline -48% after an impressive year. With that being said, FY23 earnings estimates have gone up to $4.67 per share vs. $3.20 a share 90 days ago.
Sales are projected to jump 46% this year to $10.72 billion and then decline -11% in FY23 to $9.54 billion. TA’s Q3 results beat the Zacks consensus on both its top and bottom lines earlier in the month. TA beat EPS expectations by 26% at $2.54 per share. The top line beat saw Q3 sales at $2.81 billion, 3% above estimates.
TA is down -6% YTD to outperform the S&P 500. This has lagged the Retail-Convenience Stores Markets +18%. However, over the last five years, TA is still up +101% to beat its Zack Subindustry’s +8%.
Even more intriguing, TA trades at just 5.4X forward earnings. This is nicely below the high of 21.4X it saw earlier in the year and the median of 11X. Plus, TA trades well below the benchmark and the industry average P/E of 14.4X.
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Wingstop WING
Last but not least, Wingstop (WING) is a company from the Retail-Restaurants Industry to consider. The industry is currently in the top 50% of all Zacks industries and WING lands a Zacks Rank #1 (Strong Buy). WING earnings estimates continue to trend higher after beating Q3 expectations on both its top and bottom lines in October.
The franchiser and restaurant operator of nationwide chicken chains beat Q3 EPS expectations by 25% at $0.45 per share. Sales also beat top line expectations by 3% with revenue of $92.67 million.
YoY, WING earnings are now expected to pop 22% and rise another 16% in FY23 to $1.92 per share. Top line growth is expected, with sales projected to climb 25% in FY23 and another 18% in FY23 to $417.98 million.
Wingstop is down -8% YTD to outperform the S&P 500 and roughly match the Retail Food & Restaurants Markets -7% YTD decline. WING is up an impressive +417% since going public in 2015 to beat the benchmark and its Zack Subindustry’s +75%
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Trading around $158 a share, WING trades at 95.5X forward earnings. This is higher than the industry average P/E of 24.1X but Wingstop is experiencing significant growth. Plus, WING trades nicely below its historic high of 145.9X and closer to the median of 76.1X.
Bottom Line
Some Retail & Wholesale sector stocks are seeing favorable earnings estimate revisions. These three stocks in particular crushed Q3 expectations and still trade attractively relative to their past. Investors may still have an opportunity to get in on what could be extended rallies.
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