Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.
Earnings season may be winding down, but a few top-notch earnings reports took center stage today and helped the broad-based S&P 500 break out of its four-day losing streak.
Retailers were a big reason why the S&P 500 was able to stave off what’s been a steady downtrend over the past two weeks. The Home Depot, Inc. (NYSE:HD) was certainly one of the more instrumental retailers in giving both the S&P 500 and Dow Jones Industrial Average (Dow Jones Indices:.DJI) a boost. The Home Depot, Inc. (NYSE:HD) delivered a 17% increase in its net income on a blistering 10.7% increase in same-store sales in the second quarter as low lending rates and holiday events fueled homebuilding and improvement activity. As long as lending rates remain low, The Home Depot, Inc. (NYSE:HD) is likely to be a big beneficiary and calming influence on the markets.
By day’s end, the S&P 500 had advanced by 6.29 points (0.38%) to close at 1,652.35.
Leading all performers today with a gain of 13.2% was electronic big-box retailer Best Buy Co., Inc. (NYSE:BBY). The reason behind the move was a big earnings beat and marginal revenue outperformance relative to estimates. For the quarter, revenue moved lower by 0.4% to $9.3 billion as comparable-store sales fell 0.6%, but EPS rose by a factor of seven to $0.32 from $0.04 in the year-ago period and well ahead of the $0.12 the Street was looking for. Simply put, the Best Buy Co., Inc. (NYSE:BBY) turnaround is working as I suspected it would all along. As long as the company continues to rein in costs, focus on its direct-to-consumer products, and sticks with price-matching its competition, it should remain in good shape.
Shares of clothing and accessories retailer Urban Outfitters, Inc. (NASDAQ:URBN) also strutted down the catwalk with an 8.2% gain after market-topping second-quarter earnings results. For the quarter, Urban Outfitters, Inc. (NASDAQ:URBN) delivered a 9% increase in comparable-store sales as revenue rose 12% to $759 million and net income jumped 25% to $0.51 per share. The Street expected a more modest $0.48-per-share profit from Urban Outfitters, Inc. (NASDAQ:URBN). Earnings beats have become quite common for the teen and young adult-focused retailer, but at 20 times forward earnings, it’s no longer the screaming value that it once was.