One of the primarily problems with the market lately has been a lack of solid leadership. The FANG names and technology stocks in general have been weak. Market players have been looking for relative strength elsewhere and one of the primary beneficiaries is retail.
Within the retail group there have been a number of good reports lately such as Nordstrom (JWN) . Last night Kohl's (KSS) posted earnings of $1.76 per share that was $0.12 ahead of estimates and an increase of 42% over last year. Revenues grew 45% year-over-year. The company raised the range of guidance slightly and will discuss results on a conference call at 9 am ET this morning.
The company expects EPS growth of 28% for the FYE Jan. 2019 and 5% in the year after. It sells with a trailing P/E of 15. Compare this to yesterday's stock of the day, Estee Lauder (EL) , which has a P/E of 30 and 11% EPS growth in the two years ahead. Kohl's valuation looks attractive especially if they can post some more beats in the quarters ahead.
Technically the chart is quite attractive. It has formed a cup since hitting a high over $75 in June and is pulling back this morning after testing highs yesterday. This looks like a routine 'sell the news' reaction to a solid report after market players ran the stock up yesterday.
There may be something negative lurking in the conference call but I'm a buyer of Kohl's premarket in the $76 area. I am looking for analysts to up estimates and targets, and there is the potential for this chart to turn into a cup-with-handle bullish pattern if it bounces after this initial sell-off.
Retail is a strong group, Kohl's valuation is attractive and the chart looks favorable. I'm a buyer on weakness.
I'm taking some time off this week but will be checking in later.