With earnings season right around the corner for many retailers, the Deutsche Bank team has five top stock picks, some of which the analysts feel could beat current earnings expectations.
Best Buy Co. Inc. (NYSE: BBY) will report earnings on March 3, and the Deutsche Bank team is optimistic in front of the release. The analysts are slightly ahead of Wall Street current estimates and point out that comparable sales for the nine-week holiday period increased 3.4% domestically and 2.5% companywide. That included the added benefit of about a 0.8% from mobile phone installment billing plans. With the discretionary money being a solid help, the stock could have a great quarter.
Best Buy investors are paid a 1.9% dividend. Deutsche Bank has a Buy rating on the stock and a $44 price target. The Thomson/First Call consensus price target is $41.22. Shares closed Friday at $39.11.
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Lowe’s Companies Inc. (NYSE: LOW) is the home improvement company that ranks the highest with consumers, and it ranks high with the Deutsche Bank team, as they consider the stock a top pick, and one that can beat earnings estimates when the company reports on February 25. The analysts are clear that the stock is expensive, but an earnings beat and solid guidance can lift the stock. A pickup in residential home sales could also offer a tailwind for the stock in 2015.
Lowe’s shareholders are paid a 1.3% dividend. The Deutsche Bank price target is $73, the consensus price objective is $71.35. Lowe’s closed Friday at $72.05 a share.
Michaels Companies Inc. (NASDAQ: MIK) has roared back out of private equity land, and the leading crafts retailer has done well. The company already pre-announced that holiday sales increased 1.5%, so when earnings are announced the week of March 16, there should be no huge surprises. As of last year, the company owned and operated 1,147 Michaels stores in 49 states and Canada, as well as 117 Aaron Brothers stores. In addition, the company, through its subsidiary, Artistree, manufactures precut mats and custom framing merchandise.
Deutsche Bank raised the price target from $24 to $30. The consensus target is $27.13, and the stock closed on Friday at $27.45.
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Restoration Hardware Holdings Inc. (NYSE: RH) has been a momentum trader’s dream since coming back from private equity just over two years ago. It has not yet set a date for its fourth-quarter earnings release, but it recently pre-announced in-line sales and earnings results for the quarter. The Deutsche Bank analysts like the stock into earnings and long term. The company is a high-brow retailer of home furnishings with product categories such as furniture, lighting, textiles, bathware, décor, outdoor and garden, tableware and children’s furnishings. As of the most recent report, Restoration Hardware operated 70 retail stores consisting of 62 Galleries, five full-line Design Galleries and three Baby & Child Galleries, as well as 17 outlet stores in the United States and Canada.
The Deutsche Bank price target is $100, and the consensus is right in line at $99.75. Shares close last Friday at $86.77.
TJX Companies Inc. (NYSE: TJX) is another top stock for investors looking for a consumer discretionary position, and a company that Deutsche Bank thinks can beat earnings when it reports on February 25. The stock is an ideal long-term portfolio holding, as it is the low-price leader in retail, and it still has many customers who shop for bargains. Growing online sales and increased store traffic may bode well, as the company refocused efforts over the past couple of years to increase and enhance the online presence. The company operates stores under the T.J. Maxx, Marshalls, HomeGoods, Winners, HomeSense, T.K. Maxx and Sierra Trading Post trademarks.
TJX investors are paid a 1.0% dividend. The Deutsche Bank price target is $68, but the consensus target is $70.59. Shares ended Friday at $69.24.
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While none of these stocks are dirt cheap, extra cash in consumers’ pockets, combined with overall improving economy and the job growth that comes with that, makes these top picks a solid bet for growth investors.
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