By Wallace Witkowski, MarketWatch
Earnings season finishing up at highest P/E ratio since 2004
SAN FRANCISCO (MarketWatch) -- Expectations are high for
home-improvement chain and retail earnings this week as the last
sizable batch of S&P 500 companies for the season report
quarterly results as stock valuations have hit levels not seen in
more than a decade.
This week's results are looking to be the last hurrah closing
out the better-than-expected earnings season as forward
price-to-earnings ratios reach highs last seen in 2004 and
forecasts for first- and second-quarter earnings are signaling a
retreat.
Target Corp. (TGT) is seen contributing the most to earnings
growth in the general merchandise stores subsector this season,
according to John Butters, senior earnings analyst for FactSet.
Earnings for the subsector are tracking at 32.8% growth, according
to FactSet data.
The second highest growth among retailers is expected from
home-improvement retailers, where earnings are expected to grow by
18.1%. The big hitters in that subsector reporting this week are
Home Depot Inc. (HD), the last Dow component to report this
quarter, and Lowes Cos. (LOW)
While earnings for the first quarter are expected to be lousy in
comparison -- a sentiment which seems to crop up every earnings
season -- they'll face the added challenge trying to prop up those
high P/E ratios, especially with record-high stock prices.
This past week, the Dow Jones Industrial Average (DJI) and the
S&P 500 Index (SPX) both closed at record highs
(http://www.marketwatch.com/story/us-stocks-futures-waver-ahead-of-greece-meeting-pmi-2015-02-20),
while the Nasdaq Composite Index (RIXF) closed at its highest level
in nearly 15 years.
The forward P/E ratio for the S&P 500 is 17.1, well above
five-, 10-, and 15-year averages, according to Butters. At the same
time, more than 80% of profit forecasts from the S&P 500 fall
below the Wall Street consensus and earnings are expected to see
their first quarterly year-over-year decline since the end of the
recession.
Notable earnings reports this week
Report date Company/Ticker (FactSet EPS / revenue estimate)
Mon., Feb. 23 Express Scripts Holding Co. ($1.38 / $25.73 billion)
Tues., Feb. 24 Home Depot (89 cents / $18.68 billion)Hewlett-Packard Co. (91 cents / $27.39 billion)Comcast Corp. (78 cents / $17.69 billion)Macy's Inc. ($2.39 / $9.4 billion)
Weds., Feb. 25 Target ($1.46 / $21.72 billion)Lowe's (43 cents / $12.31 billion)Dollar Tree Inc. ($1.14 / $2.47 billion)TJX Cos. (90 cents / $8.26 billion)Salesforce.com Inc. (14 cents / $1.44 billion)L Brands Inc. ($1.80 / $4.07 billion)
Thurs., Feb. 26 Gap Inc. (73 cents / $4.71 billion)Kohl's Corp. ($1.80 / $6.32 billion)Ross Stores Inc. ($1.11 / $2.93 billion)
Fri., Feb. 27 Southwestern Energy Co. (51 cents / $992.1 million)NRG Energy Inc. (loss 1 cent / $2.93 billion)
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