Here’s why retail earnings could surprise investors

The next wave of quarterly earnings due out is largely from the consumer discretionary sector. Fort Pitt Capital Group senior portfolio manager Kim Forrest is bullish on the group, particularly if some upcoming economic data reflects continued economic growth. Here's why.

Wendy's and Urban Outfitters are two stocks in the consumer discretionary space set to report earnings in the coming weeks. Forrest said Tuesday on CNBC's "Trading Nation" that they should both stand to benefit from improving economic conditions and disposable income.

• "The general economic condition looks relatively strong. We had a great GDP number coming in from last quarter, and we're thinking that people may have picked up additional jobs, or perhaps they've gotten a raise," Forrest said.

• She will also be closely watching consumer sentiment data due out this Friday from the University of Michigan, which will indicate to her health for the sector. If consumers are "happy enough and employed, they tend to spend," which should reflect a strong number, she wrote in an email to CNBC.

• "Consumer credit stocks that have been pretty beaten-up this year might be something you want to take a look at," Forrest said.

Bottom line: Forrest is bullish on the consumer discretionary sector and some upcoming retail earnings because of a relatively strong economic backdrop.

Kim Forrest's firm owns shares of Wendy's and Urban Outfitters.

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