Tuesday's Market Minute: Previewing Toll Brothers & Costco

While we’re reaching the end of this quarter’s earnings season, a few big names remain. Toll Brothers TOL reports after the bell today, and Costco COST reports Thursday – housing and food. Both will be important for insight into the economy and the consumer.

Zacks estimates Toll Brothers’ 2Q EPS will be $1.89 on revenue of $2.07 billion dollars. If so, revenue would fall over 9% year-over-year. Toll Brothers, as a homebuilder, is sensitive to rates rising. Any impact to home demand could worry investors – although Toll does focus more on the luxury buyer, which could strengthen its demand and pricing power vs other homebuilders. In addition to demand worries, continued supply chain issues and higher raw material costs could pinch margins. Investors should keep an eye on Toll’s home deliveries forecast for the rest of the year, especially as the market expects the Fed to pause its rate hikes. 

Looking to Costco (COST), Zacks estimates its 3Q EPS will be $3.32 and revenue will hit $54.57 billion dollars. Competitors Target (TGT) and Walmart (WMT) both saw stock drops after their latest reports. Target lowered its expectations for the next quarter, citing “softening sales trends”, and estimated retail shrinkage would hit profitability by more than $500 million vs last year. Target blamed organized retail crime as a driver of shrinkage. Costco’s membership program might be preventative of similar shrinkage. We also get a preview of sales every month when Costco reports its comparable sales – April’s were up 1.4%, although it did see a drop in e-commerce. Will Costco outperform its peers as consumers tighten their budgets? 

Tune into the TD Ameritrade Network for earnings analysis and more.

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