<p>In recent weeks, the effects of the COVID-19 coronavirus have seen across the market in what I would call an “earthquake pattern.” This is when a key event causes market volatility to increase and, in the days and weeks that follow, the market experiences “aftershocks.”
Finally, we’ve reached the post-shaking phase – and while the coronavirus is still affecting the market, we’re starting to see some glimmers of hope in Wall Street. Two major retailers reported their revenues last week, and they were nicely higher than expected. At least they can be surprising results for some people.
Let’s take a closer look, and you will see not only the signs that both were on their way to a winning streak, but also what makes them a “buy” in the tool I use to find breakthrough stocks and my other growth games.
First is Target Corporation (NYSE: TGT), which reported results on Tuesday. While their revenue declined slightly during the first quarter, their results exceeded expectations. The revenue figure included poor holiday sales, but with the positive earnings surprise, the stock increased on Tuesday.
Targeted adjusted earnings of $ 1.69 per share and beat estimates of $ 1.65. So, the company booked a 2.4% profit surprise. Revenue of $ 23.4 billion was in line with Wall Street’s consensus estimate and compared to $ 23 billion in the previous quarter, a gain of 1.8%. But the big story here was that despite Target’s previous warning about its holiday sales, the company was still able to deliver the goods (so to speak) with revenue. $ 1.69 per share was a gain of 10.6% compared to the previous year.
Here is TGT’s report card from my Portfolio Grader, where you can see the larger profit trend:
As you can see, Target has a solid history of delivering positive earnings surprises, which is one of the things I look for in a growth investment.
The cash flow ratio “D” may reflect the effects of all investments that Target has made in its operations. The company has renovated stores, improved its e-commerce operations and launched several new prosperous clothing brands during the past quarter. Target’s digital sales also increased by 20% for the quarter.
The second issue that goes into the results announcement on Tuesday was the impact of the coronavirus. Case management said that the only real effect that the company has seen from the outbreak is a slightly increased demand for household items, cleaning products and food and beverage products.
This also seems to be the case for the other major box retailer, Costco (NASDAQ: COST), which reported results yesterday, after the market closed. Costco hit estimates with net sales of $ 38.3 billion, compared to analysts’ expectations of $ 38.2 billion. Similarly, earnings per share were expected to be $ 2.06 and amounted to $ 2.10.
It was also a good profit from the previous quarter, where Costco saw $ 2.01 earnings per share. But in COST’s report card below, you can see that – even before Thursday’s report – the company had a history of both profit growth and upward revisions of analysts:
You always want to remember that analysts’ estimates are not in stone. They change over time – and you want to see these estimates increase, into the earnings report. Sure, it’s a higher field to clear … but in my experience, it actually tends to signal that the company is beating expectations.
Of course, Costco’s sales in the same store beat analysts’ expectations by a particularly large margin. Analysts expected 6.4% growth and COST reported 7.9% adjusted sales growth in the same store. Costco, like Target, is experiencing a sharp increase in traffic and sales from the coronavirus outbreak despite the chaos in the larger market.
The bottom line is that people are flocking to big box dealers to store their pantries … and investors are flocking to the high-quality stocks that can see them through tough times.
Wall Street likes to worry, but I think the United States remains an oasis. The US economy is about 80% consumer driven and even in times of volatility, as now, this is still clear. THE COST is still good in 2020, despite the large downturn in the market, and it has increased by about 39% in the last year, as has TGT:
It is no coincidence that these companies are doing so well – they have positioned themselves within the structure of the economy to thrive even in difficult conditions. Stocks such as TGT and COST are good examples of stocks that can withstand the storm.
Now, if you want to invest early in the next Target, Costco or Amazon (NASDAQ: AMZN), you want to apply the strategy I use in Breakthrough Stocks.
I have selected stocks to surpass the market and based on my weekly search of almost 5,000 stocks, they are still the best investments right now.
While many people think that small capsules are “too risky” during a market downturn, the opposite is actually true. Several of my Breakthrough Stocks actually hit 52-week highs even during the recent volatility! I’ve been doing this for 40 years, and the comparative strength of my breakthrough stocks speaks for itself. Click here to see my latest Breakthrough Stocks Summit, where I discussed the “secret sauce” in my most successful stock picks.
Louis Navellier had an unconventional start, as a student who accidentally built a market-beating stock system – with returns equal to Warren Buffett. In his latest achievement, Louis discovered the “Master Key” to take advantage of the greatest technological revolution of this (or any) generation. Louis Navellier may include some of the above securities in one or more of its newsletters.