Back to (Earnings) School for Staples, Target, Plus Three Other Retailers

 NEW YORK (TheStreet) -- The five retailers profiled here before their earnings reports have had a difficult time so far in 2014. Three of the companies have stocks that are down by double-digit percentages.

It's tough to be positive about major retailers. For example, Elizabeth Arden (RDEN) , a maker of cosmetics, toiletries and fragrances, is down 43% year to date. The stock is below all five moving averages in today's first "crunching the numbers" table.

Staples (SPLS) is down 28% year to date. The stock is attempting to confirm a tradeable bottom as its weekly chart is positive. That could be a sign that the company is benefiting from back-to-school spending.

Target (TGT) is down 8% year to date, although the company appears to be coming out of the funk of the credit-card breaches during the 2013 holiday-shopping season.

TJX Cos.  (TJX) is down 17% year to date, but its weekly chart will shift to positive given a better-than-expected earnings report or forecast. I describe consumers as a 60/40 situation where 60% feel they can make ends meet, but still shop for bargains at T.J. Maxx, Marshalls and HomeGoods, while the 40% who are living paycheck-to-paycheck may shop at these stores to purchase a quality item at a discount.

Urban Outfitters (URBN) is down just 2.8% year to date, but the company may benefit from back-to-school spending on casual wear for young women.

Here are today's stock profiles. Two "crunching the numbers" tables follow.

Elizabeth Arden ($20.18) has been volatile so far in 2014, trading as low as $23.45 on Feb. 5, and as high as $37.69 on April 30.

It traded above its 200-day simple moving average between April 24 and May 12, and on May 13, the stock plunged below its 200-day SMA at $33.99, after the company posted a quarterly loss of 84 cents per share when analysts were expecting a slight profit. The year-to-date low is $19.88, which was set on Aug. 7.

Analysts expect the company to report a loss of 29 cents per share before the opening bell on Tuesday. Elizabeth Arden has a 12-month trailing price-to-earnings ratio of 121.1 and does not pay a dividend.

The weekly chart is negative but oversold with its five-week modified moving average at $22.00. Monthly and weekly value levels are $16.65 and $13.44, respectively, with annual risky levels at $26.71 and $33.81.

Staples ($11.49) has been below its 200-day SMA since Jan. 10 when this average was $15.20. The stock gapped lower on May 20 on disappointing earnings and traded as low as $10.70 on June 26. Shares are between their 50-day SMA of $11.17 and 200-day SMA of $12.95.

Analysts expect the company to report earnings of 12 cents per share before the opening bell on Wednesday. Staples has a 12-month trailing P/E ratio of 10.9 and dividend yield of 4.2%.

The weekly chart is positive with its five-week MMA at $11.34. Semiannual and monthly value levels are $10.62 and $9.55, respectively, with a weekly pivot at $11.23 and quarterly and annual risky levels at $13.07 and $15.47, respectively.

Target ($58.20) began the year below its 200-day SMA and traded as low as $54.66 on Feb. 5. The stock then rebounded and tested its 200-day SMA between July 23 and Aug. 4 when the average was $60.47. Shares are below all five moving averages in today's first table with the 200-day now at $60.19.

Analysts expect the company to report earnings of 78 cents per share before the opening bell on Wednesday. Target has a 12-month trailing P/E ratio of 16.1 and dividend yield of 3.6%.

The weekly chart is negative with its five-week MMA at $59.02 and its 200-week SMA at $58.77. Monthly and annual value levels are $55.77 and $53.26, respectively, with weekly and semiannual risky levels at $60.11 and $65.15, respectively.

TJX ($53.14) began the year with a successful test of its 200-day SMA at $55.67 on Feb. 5. The stock shot as high as $62.37 on March 11, and traded back and forth around the 200-day SMA between April 11 and May 14 before declining to as low as $51.91 on July 18.

Analysts expect the company to report earnings of 73 cents per share before the opening bell on Tuesday. TJX has a 12-month trailing P/E ratio of 18.1 and dividend yield of 1.3%.

The weekly chart shifts to positive given a close on Friday above its five-week MMA at $53.94. Monthly and weekly value levels are $52.41 and $51.71, respectively, with semiannual and quarterly risky levels at $60.66 and $63.16, respectively.

Urban Outfitters ($36.05) has been moving sideways to down so far this year, falling as low as $32.23 on May 22. The stock had been above its 200-day SMA at $36.06 since Aug. 6, but closed last week a penny below that level.

Analysts expect the company to report earnings of 49 cents per share after the closing bell on Monday. Urban Outfitters has a 12-month trailing P/E ratio of 19.9, and it doesn't pay a dividend.

The weekly chart is positive with its five-week MMA at $35.26 and 200-week SMA at $34.28. Semiannual value levels are $32.85 and $32.47 with an annual pivot at $36.29 and annual and quarterly risky levels at $36.78 and $46.41, respectively.

Crunching the Numbers with Richard Suttmeier: Moving Averages & Stochastics

This table provides the technical status for the stocks profiled in today's report.

The 12-month trailing price to earnings ratio

The Dividend Yield

There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.

The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.

Interpretations: Stocks below a moving average are listed in red.

Five-Week Modified Moving Average (MMA) is one of two indicators that define whether or not a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.

A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.

A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.

A stock with a neutral technical rating has a profile that is not positive or negative.

The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three- to five-year horizon.

The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three to five day horizon and vice versa.

The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.

The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six- to 12-month horizon.

Crunching the Numbers with Richard Suttmeier: Earnings & Where to Buy & Where to Sell

This table presents the EPS estimates including date and before or after the close, and where to buy on weakness and where to sell on strength.

Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.

Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.

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

Follow @Suttmeier

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

TheStreet Ratings team rates STAPLES INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate STAPLES INC (SPLS) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has slightly increased to $359.85 million or 3.53% when compared to the same quarter last year. In addition, STAPLES INC has also modestly surpassed the industry average cash flow growth rate of -5.57%.
  • SPLS's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.74 is somewhat weak and could be cause for future problems.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 43.4% when compared to the same quarter one year ago, falling from $169.93 million to $96.21 million.
  • The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 26.94%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.70% trails that of the industry average.

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

More from Opinion

Elon Musk's Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Twitter Tirade Is the Dumbest Thing on Wall Street

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Time to Talk Tesla: What Happened This Week, Elon?

Time to Talk Tesla: What Happened This Week, Elon?

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy

Apple Needs to Figure Out Its Self-Driving Vehicle Strategy