With the Memorial Day holiday, it's a shortened trading week in the United States. However, there are still a number of important earnings reports on tap.
Investors should keep an eye on these four names in the week ahead.
Here's what to look for from Bank of Nova Scotia, Dick's Sporting Goods, Costco and Dollar General.
Bank of Nova Scotia (May 28)
The Bank of Nova Scotia (BNS) is a nice dividend name for the portfolio.
I've been considering taking a position in this one for awhile. My one holdup has been some concern from analysts about the bank's exposure to the Canadian housing market.
Paying nearly a 5% yield, Bank of Nova Scotia has created strong, net interest income growth over the last five years. The bank has a history of falling in line with earnings estimates, and I'll be curious to see if 2019 starts off with the same consistency.
Analyst estimates for the full year are forecasting earnings of $5.37 per share. That means the stock is trading cheap at 9.78x forward earnings.
My one reservation continues to be the exposure to the Canadian housing market. Some are not dissuaded, and say the fear about Canada's housing market is overstated.
While it's very possible, I find myself waiting on the bench to see how this develops over the coming months.
Only a true dip will tell us how these banks are prepared.
Dick's Sporting Goods (May 29)
I've said it over and over again: Retail is a brutal business these days.
Dick's Sporting Goods, Inc. (DKS) has been fighting the same retail battle as many other names. Essentially the last big player within sports retail, DKS fought hard through the last five years to maintain revenue growth.
Sadly the retailer finally reported a 1.8% drop in sales revenue for fiscal 2019. Much of the blame was put on blow back from the ceasing of gun sales, but it still hurt nonetheless.
I've viewed DKS as a question of value.
The stock offers exceptional value, with a good dividend. The retailer has to prove that it can regain the growth story.
The main concern I have is the reliance on share buybacks to carry the earnings story. Whereas net income declined in fiscal 2019, Dick's reported a 7.58% increase in earnings per diluted share. That increase stemmed from progressive share buybacks.
Moving forward, Dick's needs to create comp sales growth and subsequent net income that doesn't rely on share buybacks in order to drive earnings per share.
If the company can do that, there's value here.
Costco (May 30)
Costco Wholesale Corp. (COST) continues to do well, reporting strong increases in sales revenue and earnings in fiscal 2018.
The good performance comes at a premium. The stock is trading at a little under 35x, trailing full year earnings of $7.09 per diluted share. Then again, you tend to pay a premium for a company that increased annual fiscal earnings by 14.07% and 16.61% consecutively.
In the first 26 weeks of fiscal 2019, Costco's earnings were up 23% to $3.74 per diluted share.
Full year estimates have Costco making about $8 a share in earnings. If that forecast holds true, the stock is trading at a forward P/E of just under 31x full year forecasts.
Again, this stock is not trading at a great discount, but it's tough to find a name producing that kind of growth numbers. I
It will be interesting to see what management has to say in regards to the effects of the ongoing China trade disputes on the company's guidance.
Dollar General Corp. (May 30)
In terms of sales growth, Dollar General (DG) is a rock star.
The discount retailer has consistently driven revenues year after year.
Dollar General finished off 2018 with a slowdown in net income. This stemmed from higher taxes relative to 2018's tax benefit from deferred liabilities, as actual pretax income in the fourth quarter actually increased year over year.
Overall, Dollar General seems like a keeper stock to me.
They operate in a discount area that is hard to touch with their scale. Fiscal year 2019 guidance forecasts net sales growth of 7%, with same store sales growth of 2.5%.
The retailer also expects operating income to increase by 4%-6%.
Full year earnings are expected in the range of $6.30 to $6.50 per diluted share. That would have the stock trading at 18.6x forward earnings.
That might be the one rub here. DG stock commands a higher premium than other retail names.
Then again, the successful growth is better than many other names.
The discount nature of their goods also adds a bit of a recession buffer in my eyes.
