Buyers Are Swarming These 3 Retail Stocks
Investors can spot favorable market trends by focusing on sectors where positive earnings estimates are being revised.
This is exactly what the Zacks retail and wholesale sector has been enjoying lately, which has propelled it to #2 of all Zacks 16 sectors.
Stocks within the same sector tend to move in a herd fashion, further reflecting the importance of focusing on areas that analysts have recently become bullish on.
Three stocks from Zacks’ retail and wholesale sectors — Dick’s Sporting Goods DKS, Kroger KR, and Mercado Libre MELI — have all improved their earnings outlook and helped lift shares.
As we can see in the chart below, all three stocks have significantly outperformed the S&P 500 over the past month, indicating buying pressure.
Image source: Zacks Investment Research
For those interested in capitalizing on the relative strength of these stocks, let’s take a closer look at each one.
Mercado Libre
Mercado Libre is one of the largest e-commerce platforms in Latin America, offering a total of six integrated e-commerce services. The stock currently holds the coveted Zacks rank #1 (Strong Buy).
Image source: Zacks Investment Research
MELI posted strong results in its latest release, beating the Zacks Consensus EPS estimate by more than 50%. Quarterly sales totaled $3 billion, beating estimates and growing an impressive 56% year over year.
There were several major highlights from the quarter; Total payment volume was $36 billion, up an impressive 80% Y/Y. In addition, gross merchandise volume was reported at $9.6 billion, up 34.7% from the year-ago quarter (both on a currency-neutral basis).
The market cheered the results and sent shares higher. This is illustrated by the green arrow circled in the graphic below.
Image source: Zacks Investment Research
Dick’s sporting goods
Dick’s Sporting Goods is a major omnichannel sporting goods retailer offering athletic footwear, apparel, accessories and a wide range of outdoor and athletic gear. DKS is currently a Zacks Rank #2 (Buy).
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Like MELI, Dick’s Sporting Goods has achieved better than expected results in its latest release; DKS posted earnings per share of $2.93, 2.5% above expectations and reflecting 11thth Bottom line consecutive hit. Additionally, the sports retailer generated nearly $3.6 billion in revenue, which is well ahead of expectations and shows year-over-year growth of 7%.
Image source: Zacks Investment Research
And in a very shareholder-friendly way, DKS increased its annualized dividend to $4.00 per share, a massive 105% increase from $1.95 per share in 2022. The dividend is payable on March 31stSt2023, to shareholders of record as of the close of March 17th2023
Kroger
Kroger is one of the world’s largest grocery retailers with store formats including supermarkets, discount warehouses and multi-department stores. KR is currently ranked as Zacks Rank #2 (Buy).
The company’s shares are cheap on a relative basis, with the current 10.6 times the forward earnings multiple, well below the 12.4 times the five-year median and the Zacks retail and wholesale sector average.
Image source: Zacks Investment Research
And much like DKS, Kroger rewards shareholders generously; the company’s annual dividend is currently 2.2%.
Impressively, the retailer has increasingly rewarded shareholders, with a 15% annual dividend growth rate over five years.
Image source: Zacks Investment Research
bottom line
As many investors know, 50% of a stock’s price movement can be attributed to its group, making it easier to understand the importance of targeting sectors where earnings prospects are bullish.
Currently, Zacks’ retail and wholesale sector is ranked #2 out of all 16 Zacks sectors, indicating that analysts have become bullish on its outlook of late.
And all three of the above stocks — Dick’s Sporting Goods DKS, Kroger KR, and Mercado Libre MELI — have seen positive price action over the past month on improved earnings prospects, significantly outperforming the broader market.
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The Kroger Co. (KR): Free stock research report
DICK’S Sporting Goods, Inc. (DKS): Free Stock Research Report
MercadoLibre, Inc. (MELI): Free Stock Research Report
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