Tag Archives: sales

Intel Shares Up on Dividend Hike, Raised FY16 Sales Outlook

Intel Corp.’sINTC share price went up more than 3% to $34.30 following the announcement of a dividend hike and an improved sales guidance for fiscal 2016 at its annual investor meeting.Dividend Hike Intel’s board approved an 8.3% hike in

Retail ETFs Slump: What’s Up For The Holiday Season?

The retail sector saw a bloodbath on Friday following a slew of weak reports from retailers ranging from department to dollar stores. Additionally, the soft October retail sales data added to the woes. With Thanksgiving less than two weeks away and Christmas coming up in six weeks, the growth prospects for the upcoming holiday season suddenly look dull. Retail Sales Data After a flat September, retail sales barely rose 0.1% in October, falling short of the market expectation of 0.3% growth. The lackluster growth can be blamed on a surprise decline of 0.5% in auto sales, implying that cheap gasoline failed to spur consumer spending as expected. Notably, consumer spending accounts for more than two-thirds of demand in the U.S. economy. Fast Recap of Early Q3 Earnings Total earnings from 60% of the sector’s total market capitalization reported so far are up 7.8% on revenue growth of 11.1%, with 59.1% surpassing earnings estimates and 45.5% beating on the top line. The sector kicked-off the earnings season on a solid note with growth rates and beat ratios coming in better than the pre-season expectations and other sector performances. But the trend reversed last week after departmental stores like Nordstrom (NYSE: JWN ) and Macy’s (NYSE: M ) spread an air of pessimism into the broad sector and disappointed investors. Even better-than-expected results from J.C. Penney (NYSE: JCP ) and Kohl’s (NYSE: KSS ) were unable to sweep away the negative sentiments. Nordstrom was the major dampener as the stock plummeted 15% on Friday after the company missed on both earnings and revenues by 14 cents and $43 million, respectively. The retailer lowered its sales growth guidance to 7.5-8% from 8.5-9.5% and the adjusted earnings per share guidance to $3.40-$3.50 from $3.70-$3.80 for the full year. The lackluster results came just a day after shares of Macy’s nosedived 14% on November 11 on the back of weak sales and a downbeat guidance. The second-largest department store retailer posted the third consecutive quarterly decline in sales and missed our estimates by $228 million, though it beat our earnings estimate by a couple of cents. The company now expects sales to decline 2.7-3.1% compared with the previous expectation of a 1% decline and slashed its earnings per share guidance to $4.20-$4.30 from $4.70-$4.80. However, J.C. Penney reported stronger results on November 13 with earnings and revenues coming ahead of our expectations. The company reported loss of 47 cents per share, narrower than the Zacks Consensus Estimate of loss of 58 cents while revenues of $2.897 billion were slightly ahead of our estimate of $2.869. On the other hand, Kohl’s also topped our estimates by 6 cents on earnings and $26 million on revenues on November 12. Despite the robust earnings announcement, both stocks were victims of the broad retail sector rout on Friday. Shares of JCP tumbled 15.4% while Kohl’s declined 6.4%, erasing all its gains made on November 12. Other retailers were also dragged down with their stock prices going deep into red at the close on the day. Some of these include video-game retailer GameStop (NYSE: GME ), watchmaker Fossil Group (NASDAQ: FOSL ), and apparel retailer Bebe Stores (NASDAQ: BEBE ) that shed 16.5%, 36.5% and 40%, respectively, on a single day. Big-box retailers like Target (NYSE: TGT ), Best Buy (NYSE: BBY ), Home Depot (NYSE: HD ) and Wal-Mart (NYSE: WMT ) were also hit by the sector slump. ETFs in Focus Given this, the retail ETF world also saw rough trading on the day with all the three funds, namely SPDR S&P Retail ETF (NYSEARCA: XRT ), Market Vectors Retail ETF (NYSEARCA: RTH ) and PowerShares Retail Fund (NYSEARCA: PMR ) losing 3.8%, 2.9% and 3%, respectively. XRT This product tracks the S&P Retail Select Industry Index, holding 104 securities in its basket. It is widely spread across each component as none of these holds more than 1.31% of total assets. Small cap stocks dominate about two-thirds of the portfolio while the rest have been split between the other two market cap levels. In terms of sector holdings, apparel retail takes the top spot with nearly one-fourth share while specialty stores, automotive retail and Internet retail also have a double-digit allocation each. XRT is the most popular and actively traded ETF in the retail space with AUM of about $688 million and average daily volume of more than 3.9 million shares. It charges 35 bps in annual fees and is down 11% in the year-to-date time frame. RTH This fund tracks the Market Vectors US Listed Retail 25 Index and holds about 26 stocks in its basket. It is a large cap centric fund and is heavily concentrated on the top firm Amazon.com (NASDAQ: AMZN ) with 14.6% share, closely followed by Home Depot. Sector wise, specialty retail occupies the top position with 29% share, followed by a double-digit allocation each to Internet & catalogue retail, hypermarkets, drug stores, departmental stores, and health care services. The fund has amassed $191.5 million in its asset base while average daily volume is moderate at nearly 72,000 shares. Expense ratio came in at 0.35%. The product has added 3% so far this year. PMR This retail fund provides diversified exposure across various market caps with 42% each in small and large caps and the rest in mid caps. This is easily done by tracking the Dynamic Retail Intellidex Index. The fund has accumulated just $22.4 million in its asset base while trades in a light volume of about 6,000 shares a day. The ETF charges 63 bps in fees per year. In total, the product holds 30 securities with none accounting for more than 5.72% of assets. In terms of industrial exposure, specialty retail takes the top spot at 43%, while food retail (22%) and drug stores (12%) round off the top three positions. PMR has shed 6.3% in the year-to-date time frame. What Awaits the Holiday Season? Despite the current slide, the outlook for the sector looks quite promising. This is because consumer confidence is on a rise, offering some hope for retailers ahead of the crucial holiday season. The University of Michigan consumer sentiment index rose to 93.1 in early November from 90 in October, indicating that economic recovery is on track despite the twin attacks of a strong dollar and weak global demand that have been hurting the industrial sector, especially manufacturing. Additionally, the National Retail Federation (NRF) expects sales in November and December (excluding autos, gas and restaurant) to grow at a solid pace of 3.7%. Though this marks a deceleration from last year’s growth rate of 4.1%, it is well above the 10-year average of 2.5%. A recent survey by Gallup showed that Americans intend to spend an average $812 on gifts this holiday season, up from $781 last year and the highest expected spending since 2007. The retail sector bodes solid Industry rank from Zacks perspective, which divides the sector into 19 industries at the expanded level. Out of these, 64% of the industries have a solid Zacks Industry Rank in the top 42%, reflecting strong growth prospects in the weeks ahead. Moreover, the three products detailed above have a Medium risk outlook with a top Zacks ETF Rank of 1 or ‘Strong Buy’ rating for XRT and RTH, and Zacks ETF Rank of 3 or ‘Hold’ rating for PMR. As a result, risk tolerant investors may want to consider the recent slump a buying opportunity, should they have the patience for extreme volatility. Original Post

The Smart Beta Rally That Many Investors Missed In 2015

By Luciano Siracusano, III One of the big trends in the exchange-traded fund (ETF) industry has been this year’s flow of new money into developed world equity ETFs, both unhedged and currency hedged. WisdomTree estimates that nearly $100 billion of this year’s $171 billion in ETF industry inflows cascaded into these funds through the end of October. But the vast majority of assets in international equity ETFs-and the vast majority of net inflows this year-has been concentrated primarily in developed world large-cap strategies. While equity returns for the MSCI Europe and MSCI Japan indexes have, thus far in 2015, exceeded those generated by the S&P 500 Index, the bigger bull market has actually occurred in the smaller-company segment of the developed world. If we look at year-to-date returns through October 30, we can see by how much small-cap indexes have outperformed compared to broad market indexes comprising primarily large-cap companies in Europe, Japan and the developed world. (click to enlarge) For definitions of indexes in the chart, visit our glossary . What’s interesting is that the excess return produced by the small caps compared to their large-cap brethren is not just a 2015 phenomenon. Excess returns have held up over the last year, three years, five years and the better part of the last decade going back to the inception of the WisdomTree Indexes back in May of 2006. When One Compares Returns across Asset Classes, Additional Light Bulbs Light Up The double-digit gains European and Japanese small caps have generated thus far in 2015 have not only surpassed the broad European and Japanese benchmarks (MSCI Europe and MSCI Japan), they have outperformed the major asset classes investors typically tap to construct a globally diversified portfolio: large caps and small caps in the U.S. 1 ; MSCI EAFE Index and MSCI Emerging Markets Index; REITs 2 , U.S. Treasuries, investment-grade and high-yield corporate bonds 3 ; commodities 4 and gold 5 . Moreover, year-to-date in 2015, small caps measured by the WisdomTree Japan SmallCap Dividend Index and the WisdomTree Europe SmallCap Dividend Index outperformed each of the major indexes designed to measure how each smart beta factor is performing: MSCI Momentum, MSCI Quality, MSCI Value, MSCI Low Volatility or MSCI Size. What accounts for the divergence in returns? Part of it can be explained by sector concentrations, country and currency exposure. Another reason: Small-cap stocks are less tied to the global economy and often more sensitive to inflections in local economies. This can be partly explained by the historic tendency of small-company stocks to outperform large caps. This is one of the reasons that back in 2006 WisdomTree became the first ETF manager to launch international small-cap ETFs. At that time, WisdomTree knew that international small caps not only added potential for higher returns compared to large caps but they could also provide diversification benefits to a globally diversified portfolio. Since its inception in 2006, for example, the WisdomTree Japan SmallCap Dividend Index had a correlation of .49 to the S&P 500. Adding components with lower correlations to one’s U.S. equity exposure has the potential to lower the overall volatility of a globally diversified portfolio. Conclusion Because most passive indexes and active international managers tend to concentrate primarily on large-cap stocks, international investors may miss the potential of small-cap companies unless they make a conscious effort to include them in their portfolios. We believe international small-cap exposure can help investors complete their international allocations. Returns this year in Europe, Japan and the developed world add additional real-time evidence to support our thesis. Unless otherwise stated, data sources are Bloomberg and WisdomTree. Sources S&P 500 and Russell 2000 Index. MSCI US REIT Gross Total Return and S&P Global ex-U.S. REIT USD Index. Barclays US Agg Corporate Yield-To-Worst and Barclays U.S. High Yield 2% Issr Cap Yield To Worst. Commodity Research Bureau BLS/US Spot all Commodities Index. Gold Spot Price Index. Important Risks Related to this Article Performance, especially for very short periods, should not be the sole factor in making your investment decision. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments focusing on certain sectors and/or smaller companies increase their vulnerability to any single economic or regulatory development. Investments in commodities may be affected by overall market movements, changes in interest rates, and other factors, such as weather, disease, embargoes and international economic and political developments. Diversification does not eliminate the risk of experiencing investment losses. Luciano Siracusano, III, Executive Vice President-Head of Sales and Chief Investment Strategist Luciano Siracusano, III has served as our Executive Vice President-Head of Sales and Chief Investment Strategist since March 2011. Prior to serving in those positions, Mr. Siracusano served as our Director of Research from 2001 until October 2008, and as a research analyst and editor of our various media publications from 1999 until 2001. Mr. Siracusano, together with Mr. Steinberg, was responsible for the creation and development of our fundamentally weighted index methodology.