It has been a busy week for retailers, with industry giants from Macy’s (M) to Nordstrom (JWN) all reporting their first quarter earnings results. But Q1 hasn’t treated all of these companies the same, so let’s take a look at a few more big-name retailers that investors might want to consider buying ahead of earnings next week.
Shares of Macy’s surged over 11% on Wednesday after the company topped both top and bottom line estimates, and raised its full-year earnings guidance. Meanwhile, fellow department store power Nordstrom did not perform as well and saw its stock price sink nearly 10% through morning trading on Friday after its comps climbed only 0.6%.
With that said, there are clearly still gains to be had from retail stocks even as worries about Amazon (AMZN) and other online sellers mount. Investors just need to look in the right places and search for stocks that are expected to top quarterly earnings estimates.
Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise, in one way or the other. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
Today, we are giving our readers a free look at three of these strong stocks ahead of their upcoming quarterly earnings reports. Check them out now:
Best Growth Stocks To Own For 2019: Farmland Partners Inc.(FPI)
Farmland Partners is a real estate company which owns row crop farmland located in agricultural markets throughout North America. Farmland is slated to report its latest quarterly results tomorrow, and although earnings are expected to be flat year over year, the company is projected to witness revenue growth of nearly 64%. FPI will also be looking to extend its solid earnings streak, which now includes three consecutive estimate beats. The stock is holding a Zacks Rank #2 (Buy) ahead of its report. Income investors will also note that its status as a REIT means that it offers a juicy 6.7% dividend.
Best Growth Stocks To Own For 2019: Rite Aid Corporation(RAD)
Struggling pharmacy chain Rite Aid Corporation (NYSE:RAD) was offered a lifeline a few months back when the company agreed to merge with grocery store operator Albertson’s LLC in a deal that would allow Albertson’s to go public.
Unfortunately, that lifeline wasn’t what Rite Aid investors were looking for. The proposed merger valued RAD stock at $2.50. That takeover price felt far too small to a lot of long-term Rite Aid investors, who had seen this stock earn a $9 price tag not too long ago.
As such, a movement of RAD shareholders planning to vote against the merger is gaining momentum. That is why RAD stock has fallen steeply ever since the merger announcement and now trades around $1.60.
But at these levels, RAD stock just looks too cheap.
Firstly, the deal with Albertson’s still may go through, and if so, RAD stock will rally to $2.50 in a hurry. Secondly, if a deal doesn’t go through, this is a stock which is trading at less than 10% of its trailing sales. The company is also reducing its debt by a ton thanks to an infusion of cash from selling a bunch of its under-performing stores.
That combination of dirt-cheap valuation and leverage reduction should allow shares to head higher, regardless of what happens with the Albertson’s deal.
Best Growth Stocks To Own For 2019: Hilton Worldwide Holdings Inc.(HLT)
Back in August 2014, I wrote about all of the hotel stocks hitting their stride, suggesting that you could have bought Hilton Hotels Corporation (NYSE:HLT) or any of the other major hotel operators including Marriott over the next 12 months and made money.
Two years later, I called HLT too cheap to pass up, recommending investors stay away from Marriott — I was merely pointing out MAR wasn’t as cheap — and instead go for HLT.
“In late January, Hilton launched a midscale brand, Tru by Hilton, that’s expected to appeal to millennials. It’s an effort to woo travelers other than its typical customer in the luxury and upscale markets. Some see it as a move to fight Airbnb, which managed to capture 5.4% of the U.S. room supply in 2015,” I wrote on Feb. 17, 2016. “Hey, you’ve got to fight fire with fire. Hilton will be just fine. At less than $20, HLT stock is worth owning.”
Hilton shareholders still holding today are sitting on a 134% gain in a little over two years which includes the spinoff of its two other divisions: Park Hotels and Resorts Inc (NYSE:PK) and Hilton Grand Vacations Inc (NYSE:HGV) in January 2017.
I like the move to separate hotel ownership and timeshare from the hotel operations. I expect good things from Hilton in the future.
Best Growth Stocks To Own For 2019: Spok Holdings, Inc.(SPOK)
Spok Holdings Inc (NASDAQ:SPOK) is trying to execute the always-difficult ‘pivot’. The company was formerly known as USA Mobility, and was one of the largest suppliers of pagers, with a particular emphasis on hospitals. Obviously, the pager business has been under pressure, and so Spok is trying to build out a suite of software for its users instead.
The investments behind that new business have had a significant impact on profits: EBITDA dropped 36% in 2017, for instance. Margin pressure should continue in 2018. But the software business is starting to see some improvement – 2018 guidance projects 6-17% revenue growth – and the pager business still throws off a ton of cash. (One might think hospitals would have long since abandoned the technology. But near-100% reliability and doctors’ level of comfort have kept declines relatively manageable, and Spok has been able to cut expenses at the same time.)
This has been a company that has managed its cash flow well, and CEO Vince Kelly has said the company will pull back on its investments if they don’t pay off. If the software business fails, existing cash and future profits from the pager business provide some cushion. If the company wins in software, however, there’s real upside here, particularly with the stock not from a multi-year low.
With cash on the balance sheet equal to about one-third of its market capitalization, Spok has time to let its strategy play out. And with a dividend yield of 3.4%, shareholders get paid to wait.