Earnings season: Low expectations make it like getting ‘9th place ribbon’ says analyst
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Corporate results this quarter have mostly outpaced expectations, but accusations of so-called ‘sandbagging’ remind one strategist of an early 2000s comedy. “It’s a little like in Meet the Parents” says JJ Kinahan, IG North America CEO, reminding us how Ben Stiller’s character won “the 9th place ribbon” for an unspectacular performance. The inference being that low expectations set a comfortable bar for some companies to jump over. It’s not over yet of course, and Kinahan points to the retailers as “the most interesting part of results season”, providing an opportunity for the individual investor to see “what comes next”.

Speaking with Julie Hyman and Brad Smith on Yahoo Finance, Kinahan says “the retail picture has quite a dichotomy of haves and have-nots”. We’ll get a litmus test on the health of businesses on both sides of that equation in the days to come: Home Depot (HD), Target (TGT) Walmart (WMT), and TJX Companies (TJX) are all set to report results.

It’s certainly not all doom-and-gloom, but more the functioning of markets perhaps. Kinahan points to one stock that has “driven things” this earnings season. “The Apple (AAPL) performance was awesome,” he says. “As we continue, we just want to hear outlooks.”

Watch the entire interview here.

Key Video Moments

00:00:17: Apple

00:00:45: Retail outlook

00:01:25: Opportunity for investors

Video Transcript

JJ KINAHAN: Well, I think the lowered expectations being the key. We want to be a little bit careful here in the fact that it was a little bit like– if you remember “Meet the Parents” where Gaylord Focker got the ninth place ribbon– I think there are a few ribbons being given out for not spectacular performances. That being said, the Apple performance was awesome.

And let’s face it, it’s been a few stocks that have really driven things overall. So I think that really helped confidence in the market overall. The Tyson earnings this morning, I think, were a little bit surprisingly bad, if you will, their future outlook. And so I think as we continue, we just want to hear outlooks.

The most interesting part of the earnings season, in my opinion, actually is yet to come. Why do I say that? Because we haven’t heard from any of the retailers yet. And so as we know, and as you guys report every single day, the retail picture has really been quite a dichotomy in haves and have nots.

And so I’m very interested to see what’s going to happen with the retailers overall if we will continue to see this. Because some of the stocks that we’ve seen struggle over the past couple of earnings, like a Nordstrom’s, is going to be very, very interesting overall. We want to see stocks like Macy’s, like Target, obviously, Walmart being a leader there.

So again, I think the earnings– the earnings season in retailers is going to provide the most opportunity, in my opinion, for the individual investor in terms of where to see what comes next. And the most important part about those are going to be those CEO comments, as you just referenced.