Today's stock market
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The price of crude oil jumped 3%, giving strength to energy stocks; the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) rose 2%. Utility shares retreated from recent strength, with the Vanguard Utilities ETF (NYSEMKT:VPU) slipping 0.7%.
As for individual stocks, two retailers surprised observers with the strength of their sales gains. Sales at Lowe's Companies (NYSE:LOW) rebounded from a cold spring, and Target Corporation (NYSE:TGT) reported a record traffic increase in its stores.
Lowe's beats estimates, slims down its business
Shares of home improvement retailer Lowe's rose 5.8% after the company reported second-quarter results that exceeded expectations and announced the closing of 99 Orchard Supply stores. Net sales grew 7.1% to $20.9 billion and earnings per share -- adjusted for a non-cash charge of $230 million taken for the store closures -- jumped 32% to $2.07. Analysts were expecting EPS of $2.02 on sales of $20.8 billion.
Comparable sales grew 5.2% as the company rebounded from slow growth last quarter due to weather. Comps were up 8.2% in May, but growth slowed to 4.2% in June and 3% in July. Transactions grew 0.6% and the average ticket was up 4.5%. Gross margin increased 25 basis points to 34.46%
Lowe's also announced the hire of a new chief financial officer, David Denton, previously CFO of CVS Health.
The closing of the Orchard Supply stores and plans to aggressively reduce low-performing items in inventory led Lowe's to reduce full-year guidance. Total sales and comparable-sales growth estimates were each reduced half a percentage point to 4.5% and 3%, respectively, and EPS guidance was cut from a previous midpoint of $5.45 to a range between $4.50 and $4.60.
This was the first report by incoming CEO Marvin Ellison, and despite the fact that Lowe's underperformed rival Home Depot's second quarter, investors seem encouraged that changes in the works are movement in the right direction.
Target grows sales on strong consumer spending
Target reported comparable-sales growth that was the best it has seen in in 13 years, topping estimates and boosting the stock 3.2%. Revenue grew 6.9% to $17.8 billion, beating the analyst consensus of 5.4% growth. Adjusted earnings per share increased 19.8% to $1.47, well above Wall Street's estimate of $1.40 per share.
Comparable sales grew 6.5%, the highest since 2005, with an increase in traffic of 6.4%, the most since the company started reporting the metric in 2008. Online sales growth provided a big boost to Target's top line, rising 41% and contributing 1.5 percentage points to comparable sales. Gross margin slipped a bit to 30.3% from 30.4% in the period a year earlier, and operating margin fell 20 basis points from the year before to 6.4%. Operating income, however, grew 3.6% to $1.13 billion.
Target officials expressed optimism for the second half of the year, raising full-year EPS guidance from $5.15-$5.45 to $5.30-$5.50, an increase of 14.7% from 2017 at the midpoint. "We're on track to deliver a strong back half and we've updated our full year guidance to reflect the strength of our business and the consumer economy," said CEO Brian Cornell in the press release. "As we look ahead to 2019, we expect to achieve scale across the full slate of our initiatives -- creating efficiencies and cost-savings, further strengthening our guest experience and positioning Target to continue gaining market share."