The fourth-quarter profit growth estimate for S&P 500 consumer
discretionaries jumped from 6.7 percent on Monday to 8.7 percent
Friday, with results from Home Depot <HD.N>, Macy's <M.N> and
Priceline.com <PCLN.O> among the strongest influences, Thomson
Reuters data showed.
Retailers' shares have risen sharply for the week and month, too.
The S&P 500 retail index <.SPXRT> jumped 4.5 percent this week, its
best weekly percentage gain since November 2012, and climbed 8
percent for February, its best month since October 2011.
But the index remains down 0.3 percent for the year after falling
7.7 percent in January. The S&P 500, by contrast, is up 0.6 percent
for 2014 so far.
"I think too many people were either too short or underinvested in
the retail space, figuring the terrible weather we've had was going
to persist and that the retail results were going to be
underwhelming," said Michael James, managing director of equity
trading at Wedbush Securities in Los Angeles.
Many investors have supported the view that harsh winter weather was
behind recent weakness in U.S. economic reports, including retail
"I think (results) we've seen this week justify higher valuations
for the retail space in general," James said.
The forward price-to-earnings ratio for the S&P consumer
discretionary is at 18.5, well above 15.5 for the entire S&P 500 and
the highest of the 10 S&P sectors, according to Thomson Reuters
To be sure, discretionary results for the first quarter may have
been more negatively affected by the weather.
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Eighteen S&P companies in the sector so far have issued negative
outlooks for the first quarter, while not one has issued a positive
one, Thomson Reuters data showed.
Priceline.com, for instance, forecast profit of $6.35 to $6.85 a
share for the first quarter, while analysts expected $7.19.
Growth in the sector has been driven by companies in home
improvement, e-commerce and autos within the sector, with e-commerce
benefitting from the bad weather, said Natalie Trunow, chief
investment officer of equities at Calvert Investment Management in
Weather "might affect first quarter more than the fourth," she said.
(Reporting by Caroline Valetkevitch;
editing by Andrew Hay)
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