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3 Retail Stocks to Buy on Strong 2018 Earnings Estimates

Benjamin Rains
Updated
The quickly changing retail environment has been written about almost ad nauseam in 2017, but the simple truth is, the landscape has been forever altered by the likes of Amazon (AMZN) and the expansion of e-commerce. However, the retail industry is far from doomed, especially if investors look in the right places.

The quickly changing retail environment has been written about almost ad nauseam in 2017, but the simple truth is, the landscape has been forever altered by the likes of Amazon AMZN and the expansion of e-commerce. However, the retail industry is far from doomed, especially if investors look in the right places.

Brick-and-mortar shops shuttered at an alarmingly high rate this year, and many investors pulled their money out of retail. Nevertheless, many retailers have been able to grow in 2017 by improving their core business and developing greater brand equity with customers.

On top of that, retailers and investors have become more optimistic that a GOP tax overhaul could help bolster bottom lines. Furthermore, the 2017 holiday shopping season is shaping up to be one of the strongest in recent years, which stems largely from greater overall consumer confidence. And now, this positive outlook seems poised to carry over into the New Year.

With that said, let’s take a look at three retail stocks with high Zacks Ranks that are also great 2018 growth stocks and are projected to see their bottom lines expand:

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1.      Lululemon Athletica Inc. LULU

This maker of high priced, high-quality yoga pants and athleisure apparel recently posted strong third-quarter earnings and revenues and raised its full-year outlook. Lululemon’s positive outlook spurred investor confidence that helped its shares surge to a new 52-week high on Tuesday. Lululemon is also currently a Zacks Rank #1 (Strong Buy).

Currently, our Zacks Consensus Estimates calls for Lululemon’s fiscal 2018 EPS to reach $2.85 per share, which would mark a 14.01% year-over-year jump. This comes on top of Lululemon’s expected 16.73% earnings jump in 2017. On top of those bottom-line projections, the company’s full-year 2018 sales are also projected to pop 11.48% to hit $2.90 billion.

Investors might also be happy to learn that Lululemon has received 13 upward earnings estimate revisions for fiscal 2018 against no downgrades, all of which came in the last 60 days. Lululemon earned this same upgrade ratio for its full-year 2017 totals, which could help it build momentum heading into next year.

2.       Restoration Hardware RH

Restoration Hardware is currently a Zacks Rank #1 (Strong Buy) and rocks an “A” grade for Growth in our Style Scores system. This strong Growth grade helps the upscale home furnisher earn an overall “A” VGM score.

Within the last 60 days, RH has experienced 11 upward earnings estimate revisions for its fiscal 2017, compared to no downgrades. Furthermore, the company earned 10 positive earnings estimate revisions and zero downgrades for 2018.

Based on our current Zacks Consensus Estimates, RH is expected to see its fiscal 2018 earnings skyrocket another 73.36% above its current 2017 EPS growth projection of 132.05%. Looking even farther ahead, RH is expected to see its earnings grow at an annualized rate of 34.44% over the next three to five years.

3.       Five Below, Inc. FIVE

Shares of Five Below hit a new 52-week high on Tuesday, and before today’s gains, the discount retailer’s stock had already soared 70.90% in 2017.

Five Below is projected to see its full-year 2017 earnings jump 36.70%, based on our current Zacks Consensus Estimates. Looking to 2018, the company’s EPS is expected to climb another 15.28% to hit $2.05 per share. Five Below has also earned five upward earnings estimate revisions for fiscal 2018 against no downgrades, all within the last 60 days.

What’s more, Five Below is currently a Zacks Rank #1 (Strong Buy) and is projected to see its EPS grow at an annualized rate of 26.50% over the next three to five years.

Zacks Editor-in-Chief Goes "All In" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Restoration Hardware Holdings Inc. (RH) : Free Stock Analysis Report
 
Five Below, Inc. (FIVE) : Free Stock Analysis Report
 
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