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Retail Stocks' Q3 Earnings Slated for Oct 28: AAN, AN

After five back-to-back quarters of earnings decline, the trend has finally come to a halt. Investors keeping a close watch on the Q3 earnings season, eagerly awaiting earnings growth, are likely to witness a decent picture this reporting cycle.

Per our Earnings Outlook report as of Oct 26, out of the 198 S&P 500 companies that have come up with their quarterly numbers, approximately 73.7% posted positive earnings surprises, while 61.1% beat top-line expectations. According to the report, earnings for the 198 S&P 500 companies that have reported so far are up 3.2% from the same period last year, while revenues have increased 1.9%.

Further, the report projects that earnings for the total S&P 500 companies will improve 1.4% from the year-ago period with total revenue also increasing at an equivalent rate.

The performance of the index is not restricted to a single sector, and of the 16 Zacks sectors, five are expected to witness an earnings decline in the third quarter, with Auto, Oil/Energy and Transportation being a big drag. However, the Retail/Wholesale sector is showing an improvement despite overseas turmoil, fluctuating commodity prices and the Fed’s pending decision over the rate hike.

Total earnings for the Retail/Wholesale sector are estimated to rise 5.4%, whereas revenues are projected to increase 5.3%.

So, let’s see what awaits the following Retail/Wholesale stocks that are queued up for third-quarter 2016 earnings releases on Oct 28.

To start with Aaron's, Inc. AAN, we are unsure whether this specialty retailer of consumer electronics and home accessories, will be able to post a positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the third quarter stands at 47 cents. The company has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

AARONS INC Price and EPS Surprise

AARONS INC Price and EPS Surprise | AARONS INC Quote

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Aaron's Core business remains challenging. In fact, management also lowered its 2016 outlook in the last earnings release, considering its ongoing business trends and sale of HomeSmart assets – making us somewhat cautious of the upcoming results. In the trailing four quarters, the company has missed the Zacks Consensus Estimate by an average of 3.9%. (Read: Aaron's Q3 Earnings: What's in Store for the Stock?)

Next, let’s take a sneak peek at AutoNation, Inc. AN, the largest automotive retailer in the U.S. In the trailing four quarters, the company has lagged the Zacks Consensus Estimate by an average of 0.6%. However, in the last quarter, it posted a positive earnings surprise of 2.9%. The Zacks Consensus Estimate for the third quarter is currently pegged at $1.14.

AUTONATION INC Price and EPS Surprise

AUTONATION INC Price and EPS Surprise | AUTONATION INC Quote

Our proven model shows that AutoNation is likely to beat earnings because it has the right combination of the two key ingredients. It currently has an Earnings ESP of +0.88% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AutoNation is poised to benefit from the recovery in the auto market, backed by its optimal brand and market mix as well as a disciplined cost structure. It will also gain from the expansion of its business through acquisitions. However, the company competes on the basis of location, service, price, selection, and online and mobile offerings. (Read: AutoNation Q3 Earnings: Stock to Beat Estimates Again?)

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