Zacks Earnings Trends Highlights: Target and Best Buy

For Immediate ReleaseChicago, IL – March 6, 2025 – Zacks Director of Research Sheraz Mian says, "We can safely say that it has been a good reporting cycle, with the growth pace showing a notable accelerating trend and companies comfortably beating consensus estimates”Analyzing Retail Earnings in a High-Tariff EconomyNote: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>Here are the key points:With more than 98% of the earnings reports already in, we can safely say that it has been a good reporting cycle, with the growth pace showing a notable accelerating trend and companies comfortably beating consensus estimates.Total earnings for the 491 S&P 500 companies that have reported results are up +14.8% from the same period last year on +5.8% higher revenues, with 76.4% beating EPS estimates and 65.2% beating revenue estimates.The reporting focus is shifting to the Retail sector, where the brick-and-mortar operators are on deck to report results in the days ahead. However, more than half of the Zacks Retail sector companies have already reported Q4 results.For the Zacks Retail sector, we now have Q4 results from 98.3% of the sector’s market capitalization in the S&P 500 index. Total earnings for these companies are up +28.8% from the same period last year on +6.0% higher revenues, with 75.9% beating EPS estimates and 72.4% beating revenue estimates. Excluding Amazon’s results from the reported Retail sector numbers, the Q4 earnings and revenue growth rates adjust down to +3.0% and +4.3%, respectively.Tariffs Amplify Retail Sector’s Earnings WoesThe earnings focus lately has been on the Retail sector, with big-box operators coming out with quarterly results, though headlines about tariffs have been stealing the thunder. Target TGT and Best Buy BBY became the latest retailers to report good-enough results for the holiday quarter, but Target guided lower on comps while Best Buy didn’t provide any guidance.Tariffs are a much bigger headwind for Best Buy than Target, as almost all of its products are sourced from abroad, with China and Mexico as the major exporting markets. Target noted on the call that they have significant exposure to fresh produce in Mexico but rely on domestic supplies for roughly half of their cost of goods sold and have plenty of flexibility in their supply chain. That said, management cited tariffs as one of the reasons for the downgraded comp guidance.Beyond Target and Best Buy, the restrictive tariff regime is problematic for retailers as they will have to absorb all or part of the tariff-driven increased product cost if they can’t pass it on to their customers for competitive reasons. That’s a hit to their margins. It will burden customers if they pass on the incremental cost increases, potentially weighing on sales.Part of Target’s reduced comp guidance reflected signs of weakness in February that were also corroborated by other macroeconomic data like consumer confidence, jobless claims, and the internals of the latest ISM readings. This has raised concerns in the market that the tariff impositions have likely exacerbated these softer February readings.Best Buy’s results showed strong performance during the holidays, with the company coming out with its first positive comp growth since the 2021 Q3 period. In addition to the company’s new sales measures during the holidays, Best Buy noted favorable demand trends in the mobile phones and computer categories, reflecting product innovation and replacement demand.Given the new tariffs, it’s uncertain to what extent these favorable trends will remain in place. The company had estimated that the earlier 10% tariff on China was a roughly 100 basis points negative hit to comps.Unlike Target, Best Buy shares had held up relatively better prior to this quarterly release. But the stock has given up most of its earlier gains, as seen in the chart below that shows the one-year performance of Best Buy and Target relative to the S&P 500 index.Tech Sector’s Earnings Outlook Begins to ShiftThe Tech sector has been a significant growth driver in recent quarters, and we saw the same trend at play in 2024 Q4. For Q4, Tech sector earnings are expected to be up +25.9% from the same period last year on +11.3% higher revenues, the 6th quarter in a row of double-digit earnings growth.This would follow the sector’s +23.2% earnings growth on +12.1% higher revenues in 2024 Q3. The sector’s growth trajectory is expected to continue in the coming quarters.The Tech sector has also been among those few sectors that have steadily enjoyed an improving earnings outlook, with estimates steadily increasing. However, the more recent data on this count shows a shift in the revisions trend, as the chart below of aggregate 2025 earnings estimates for the sector shows.The Earnings Big PictureThe chart below shows expectations for 2024 Q4 in terms of what was achieved in the preceding four periods and what is currently expected for the next four quarters.Total S&P 500 earnings for the current period (2025 Q1) are currently expected to be up +6.1% from the same period last year on +3.8% higher revenues.EsEstimates for the period have been coming down since the quarter got underway, as the chart below shows.ThThe revisions trend is broad-based, with estimates for 15 of the 16 sectors down since the start of January (Medical is the only sector whose estimates have increased). Sectors suffering the most significant cuts to estimates include Conglomerates, Aerospace, Construction, Basic Materials, Autos, and others. Unlike other recent periods, estimates for the Tech sector have also been under pressure.The expectation is for double-digit earnings growth in each of the next two years, with the number of sectors enjoying strong growth notably expanding from the narrow base we have been seeing lately.In fact, 2025 is expected to have nearly all Zacks sectors enjoy earnings growth, with 6 of the 16 Zacks sectors expected to produce double-digit earnings growth. Unlike the last two years, when the Mag 7 group drove all or most of the aggregate earnings growth, we will have double-digit S&P 500 earnings growth in 2025, even without the contribution from this mega-cap group.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comZacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Target Corporation (TGT): Free Stock Analysis Report Best Buy Co., Inc. (BBY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks