What are we screening for?
North American-listed consumer discretionary distribution and retail companies with strong price momentum.
The screen
Amid rising inflation and fears of an economic pullback, the S&P 500 Index is up more than 17 per cent so far this year, with the technology and communication services sectors delivering returns north of 40 per cent.
Several U.S.-listed companies recently delivered strong quarterly earnings results that could give investors insights into how the distribution and retail sectors are performing. Amazon.com Inc. reported a 4.2 per cent increase in online sales, and a 6.4 per cent increase in its brick-and-mortar stores, which include the Whole Foods chain. Both of those increases were better than expected.
As second-quarter earnings season draws to a close, investors’ attention will shift to U.S. inflation data being released on Aug. 10, and whether the U.S. Federal Reserve will look at another interest rate hike.
Today, we screen for North American listed consumer discretionary distribution and retail companies exhibiting strong price momentum.
First, we screen for Canadian and U.S.-listed consumer discretionary distribution and retail companies with a market capitalization greater than US$1-billion.
Next, we screen for companies that have shown strong price momentum. The StarMine Price Momentum model includes a blend of short, mid and long-term components, and industry-specific ones, and recognizes the tendency of short-term trends to revert to their long-term mean. Higher scores indicate stocks with the strongest price momentum. We screen for companies with a score greater than 90, with 100 being the highest score.
More about Refinitiv
Refinitiv, a London Stock Exchange Group business, is one of the world’s largest providers of financial market data and infrastructure, serving more than 40,000 institutions worldwide. Refinitiv provides information, insights and technology that drive innovation and performance in global financial markets, enabling the financial community to trade smarter and faster, overcome regulatory challenges and scale intelligently.
What we found
The screen, with results ranked by the StarMine Price Momentum Regional Rank, produced nine companies across four subsectors.
Canadian Tire Corp. Ltd. CTC-A-T, which ranked highest in the Price Momentum Model with a score of 100, was one of two Canadian-listed stocks to make the screen. Canadian Tire operates three business segments: retail, financial services and CT REIT. The retail segment contains several nationwide banners, including Canadian Tire, SportChek and Mark’s, while the financial services segment has benefited from the Triangle Rewards program’s sales growth.
Canadian Tire is set to announce its second-quarter earnings on Aug. 10, and the current consensus earnings per share estimate is $3.09, with analysts noting potential headwinds facing the company. Canadian Tire suffered a fire at the A.J. Billes Distribution Centre in Brampton, Ont., earlier this year, and some dealers have reported higher than normal inventory levels, both of which could impact revenue and earnings. Despite this, the company is well positioned with its diversified banners and multicategory sales mixture, which should help mitigate against changing consumer spending habits.
Urban Outfitters Inc. URBN-Q is a portfolio company of global consumer brands and lifestyle products and was the sole apparel retail company to make the screen with a score of 92 on the Price Momentum Model. Urban Outfitters operates three business segments, retail, wholesale and Nuuly. The company’s brands include Urban Outfitters, Free People and Nuuly, a monthly subscription service that gives customers access to an assortment of fashion products.
The company currently generates about 50 per cent of its revenue from e-commerce, providing it with some insulation from declining in-store retail sales, while also generating half its revenue from in-house brands that offer higher margins than outside labels. Urban Outfitters will announce its second-quarter earnings on Aug. 22, and the consensus estimates are US$1.25-billion in top-line revenue, and US$0.89 in earnings per share.
Investors are advised to do their own research before trading in any of the securities shown.
Stephen Donovan, MBA, is a Senior Customer Learning Manager at Refinitiv, covering cross-asset trading for the Refinitiv Academy.
Stephen Donovan, MBA