Q4 Earnings Season Update
This earnings season has been a story of growth thus far. According to Zack’s Investment Research, 148 members of the S&P 500 have reported as of Thursday, January 26th. Total earnings from these companies have grown 5.9% in Q4 compared to 4.7% in Q3. Overall, S&P 500 member earnings are on pace to reach their highest level in nearly two years.
One sector that has most (positively) surprised investors has been consumer discretionary stocks. So far these companies have reported total earnings growth of 9.3% on 7.5% revenue growth while 75% have beat their estimates. On top of that, CNBC recently reported that consumer sentiment is at its highest level since 2004.
So why not take a look at some fundamentally attractive consumer stocks that could positively surprise investors this week?
6 Consumer Stocks That Could Takeoff On Earnings
According to Yahoo finance, there are 51 companies listed in the consumer discretionary sector expected to report earnings this coming week (1/30 - 2/3). However, only six appear to be trading well below their finbox.io fair value estimate: Penn National Gaming (Nasdaq:PENN), Murphy USA (NYSE:MUSA), 1-800-Flowers.com (Nasdaq:FLWS), Ralph Lauren (NYSE:RL), Sally Beauty (NYSE:SBH) and Coach (NYSE:COH).
Penn National is expected to report earnings on Thursday before the market opens while six valuation models conclude a fair value range of $16.50 to $21.12 and $18.94 at the midpoint. This compares to Wall Street's $17.45 price target derived from eleven analysts which implies 25% upside.
<img src='http://res.cloudinary.com/finbox/image/upload/v1485544808/1_-_PENN_mxcpdx.jpg' alt= ‘PENN finbox.io fair value estimate’>
Murphy USA is also expected to report on Thursday but after the market closes. Seven separate valuation analyses imply a fair value of approximately $82.50 - right in line with Wall Street's target.
<img src='http://res.cloudinary.com/finbox/image/upload/v1485544808/2_-_MUSA_psojff.jpg' alt= ‘MUSA finbox.io fair value estimate’>
Nine cash flow valuation models imply that 1-800-Flowers.com is 25% undervalued. The company is expected to report earnings on Tuesday before the market opens.
<img src='http://res.cloudinary.com/finbox/image/upload/v1485544808/3_-_FLWS_maid7r.jpg' alt= ‘FLWS finbox.io fair value estimate’>
Ralph Lauren is scheduled to report earnings on Thursday before the market opens and the stock is currently trading near its 52-week low. Finbox.io fair value data implies that shares are 24% undervalued while Wall Street's consensus price target of $104.56 implies nearly 20% upside.
<img src='http://res.cloudinary.com/finbox/image/upload/v1485544808/4_-_RL_n39xda.jpg' alt= ‘RL finbox.io fair value estimate’>
Eight cash flow analyses imply that Sally Beauty is approximately 20% undervalued prior to reporting earnings (expected Thursday). Shares are also trading near their 52-week low.
<img src='http://res.cloudinary.com/finbox/image/upload/v1485544808/5_-_SBH_arftgw.jpg' alt= ‘SBH finbox.io fair value estimate’>
Coach is scheduled to report earnings on Tuesday before the market opens. The Wall Street consensus price target of $43.28 is slightly above finbox.io's fair value estimate of $42.84. Both estimates imply roughly 20% margin of safety.
<img src='http://res.cloudinary.com/finbox/image/upload/v1485544808/6_-_COH_pq4a31.jpg' alt= ‘COH finbox.io fair value estimate’>
All these consumer discretionary stocks have strong fundamentals and could easily trade higher following a positive earnings surprise. Value investors may want to take a closer look at these names prior to them reporting.
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photo credit: ola15