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Retailers Headline This Week's Earnings

Stocks in this article: HD SKS DLTR M PCLN TGT TJX

NEW YORK ( TheStreet) -- Today I profile seven stocks in the retail-wholesale sector. Six are rated buy with one rated hold.

The seven retailers I cover today report fourth quarter results on Tuesday and pre-market on Wednesday.. Tomorrow I will cover seven more retailers that report earnings after the close on Wednesday and on Thursday.

We begin the week with 62.0% of all stocks overvalued versus the 65.0% reading that defines a ValuEngine Valuation Warning. We show 15 of 16 sectors overvalued with the retail-wholesale sector among the 10 sectors overvalued by more than 10.0%.

When the fundamentals are overvalued as they continue to be and with the weekly charts for the major equity averages technically overbought, my recommended investment strategy is to reduce allocations to stocks on strength to risky levels. Investors should have reduced their allocations to stocks by 50% once the fourth quarter earnings season comes to an end.

On Tuesday the Conference Board releases its Consumer Confidence Index for February and this measure surprisingly slipped to 58.6 in January and economists expect a rebound to 68.0 in February. Even with this rise, measures of consumer confidence will remain well below the neutral 90 to 110 range. In my opinion retail stocks should not be trading near all time or multi-year highs with continued below neutral readings for consumer confidence.

Reading the Table

OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: Price at which to enter a GTC limit order to sell on strength.

My Buy-and-Trade Strategies for These Retail-Wholesale Stocks

Reporting before the open Tuesday:

Home Depot (HD - Get Report) ($65.58) is expected to earn 64 cents per share. The stock has a buy rating and set a multi-year high at $68.15 on Jan. 28. Home Depot is 15.4% overvalued and has gained 43.9% over the past 12 months and has an elevated trailing 12 months price-to-earnings ratio at 21.6. The weekly chart profile shifts to negative given a close this week below the five-week modified moving average at $65.62. My quarterly value level is $61.73 with a weekly risky level at $71.16.

Macy's (M - Get Report) ($39.08) is expected to earn $1.97 per share. The stock has a buy rating and set its multi-year high at $42.17 back on May 2. Macy's is 4.7% undervalued, has gained 5.9% over the past 12 months, and has a reasonable trailing 12 months EPS at 11.5. The weekly chart profile shifts to neutral from positive given a close this week below the five-week MMA at $38.93. My monthly value level is $38.16 with a weekly pivot at $40.13 and quarterly risky level at $41.75.

Saks (SKS) ($11.23) is expected to earn 15 cents per share. The stock has a hold rating and set a multi-year high at $12.97 in February 2011. Saks is 0.8% undervalued, is slightly lower over the past 12 months and has an elevated trailing 12 months P/E at 30.4. The weekly chart profile stays positive with a close this week above the five-week MMA at $10.92. My quarterly value level is $10.32 with a monthly pivot at $11.48 and semiannual risky level at $13.81.

Reporting after the close on Tuesday PriceLine.com (PCLN - Get Report) ($684.70) is expected to earn $6.17 per share. The stock has a buy rating and set a multi-year low at $774.96 back on 11.35 on April 10. Priceline is 7.4% undervalued and is up 16.5% over the past 12 months with an elevated trailing 12 months P/E at 22.7. The weekly chart profile shifts to negative with a close this week below its five-week MMA at $678.41. My monthly value level is $658.55 with a quarterly risky level at $750.99.

Reporting after before the open Wednesday:

Dollar Tree (DLTR - Get Report) ($41.89) is expected to earn 99 cents per share. The stock has a buy rating and is well below its 200-day simple moving average at $45.72. Dollar Tree is 16.7% undervalued, is down 4.1% over the past 12 months and has a reasonable trailing 12 months P/E at 16.7. The weekly chart profile stays positive given a close this week above the five-week MMA at $40.65. My monthly value level is $37.91 with a weekly pivot at $41.15 and semiannual risky level at $47.35.

Target (TGT - Get Report) ($63.60) is expected to earn $1.48 per share. The stock has a buy rating and set a multi-year high at $65.80 on Sept. 21. Target is 0.7% overvalued, has gained 22.8% over the past 12 months and has a reasonable trailing 12 months P/E at 14.2. The weekly chart profile stays positive with a close this week above the five-week MMA at $61.89. My weekly value level is $62.48 with monthly risky level at $65.04.

TJX Companies (TJX) ($44.22) is expected to earn 81 cents per share. The stock has a buy rating and set a multi-year high at $46.67 on Aug. 29. TJX Corp is 3.9% overvalued, has gained 27.2% over the past 12 months and has a slightly elevated trailing 12 months P/E at 17.6. The weekly chart profile shifts to negative with a close this week below the five-week MMA at $44.48. My semiannual value level is $35.77 with an annual pivot at $45.75 and weekly risky level at $47.90.



At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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