Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
For the second day in a row the Dow Jones Industrial Average (DJINDICES:^DJI) is flirting with the 16,000 mark. After twice today crossing above and then pulling back below the historic mark, as of 1:15 p.m. EST the Dow is up one point, or 0.01%, to 15,977. The S&P 500 is also fighting to break above the 1,800 mark, but at the moment is down 0.11% to 1,789. As earnings season comes to an end and little economic data is being released today, it would seem this morning's earnings releases are moving the markets more than anything else. Let's take a look at two big retailers that rolled out their reports today.
Home Depot reported quarterly sales of $19.5 billion, which was a 7.4% increase over what the retailer reported at this time last year. The retailer also reported earnings per share of $0.93, which is a 50% increase from the $0.63 per share it reported for the same quarter last year, or a 28% increase if you don't count the $0.11 per-share charge taken as a result of closing the Home Depot locations in China. Furthermore, the company said it would raise sales expectations by 7% and hike earnings per share to $3.72 for the full year.
Meanwhile, Best Buy reported quarterly sales of $9.36 billion, which was roughly in line with expectations ,and earnings per share of $0.18, which beat the $0.12 Wall Street expectation. But the retailer said earnings in coming quarters would take a hit due to the aggressive price cuts needed to allow Best Buy to compete with the likes of Amazon.com and other competitors. This announcement signals that although the company increased sales this past quarter, margins are going to continue to shrink in the future. Unless the price cuts dramatically increase sales, Best Buy may be in more trouble than many previously believed.
When it comes to earnings season, the importance lies just not what a company did in the past, but in how it believes it will perform in the future. Not all companies give forward-looking guidance, but if your holding does, it is wise to pay attention to help you make a more informed buy or sell decision.
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