How to trade this week's retail earnings reports

Published Sun, May 14 20237:33 AM EDTUpdated Sun, May 14 20238:56 AM EDT

Investors will get a sense this week on the state of the consumer this week, with several major retailers slated to report. Walmart , Target and Home Depot are among the S & P 500 companies scheduled to post their latest quarterly results. Those results come as concerns over the state of the economy weigh on investor sentiment. The University of Michigan's consumer sentiment index for May came in at 57.7, well below of expectations, as five-year inflation expectations rose to the highest level since June 2008 . Given this backdrop, CNBC Pro screened the S & P 500 to see how the retailers reporting this week typically fare on earnings. We looked at the 10-year median earnings surprise — the percentage by which the company exceeds estimates — how often they top analyst expectations, and how well each stock does on the back of those reports. Home Depot has the highest beat rate of any company on the list at 92.5%. The home-improvement giant has also exceeded earnings expectations by 3.2% over the past 10 years. However, Home Depot shares are typically muted after the company reports earnings. The stock has struggled this year, losing 8%. Telsey Advisory Group analyst Joseph Feldman noted Thursday that Home Depot is "lapping difficult comparisons from the past three years fueled by heightened home-related spending as a result of the pandemic and government stimulus." He has an outperform rating on the stock. Home Depot is slated to report Tuesday. Bath & Body Works is also slated to report Thursday. The seller of soaps and lotions beats earnings expectation more than 80% of the time, and its stock averages a 1.2% gain on earnings days. Shares of Bath & Body Works have tumbled nearly 22% year to date. "With softening discretionary data points since March and an uncertain macro backdrop, investors' expectations are low heading into 1Q earnings," Deutsche Bank analyst Gabriella Carbone wrote Friday. Ross Stores, which also reports Thursday, has beaten earnings expectations 82.5%, too. However, the stock averages a loss of 0.21% on earnings day. Shares of Ross Stores are down nearly 10% this year. However, Morgan Stanley analyst Alex Straton is optimistic heading into the report. ROST YTD mountain ROST in 2023 "We see ample opportunity for ongoing positive EPS revisions to drive the stock higher, making it a particularly attractive opportunity in the Off-Price sub-sector. Given this dynamic, ROST has arguably become our preferred Off-Price name heading into the 1Q prints," Straton wrote. Retail giant Walmart is also expected to report next week. The company has beaten analyst expectations 77.5% of the time, and its earnings per share have exceeded estimates by more than 3%. Walmart shares are up nearly 8% this year, slightly outperforming the S & P 500. The company is slated to report earnings Thursday. — CNBC's Michael Bloom contributed reporting.