5 Stocks To Watch During Back-To-School Season

Back-to-school season, which begins in July and hits a peak in mid-September, is an important time for retailers. It gives them a chance to throw off the doldrums of spring and summer, and it can offer a preview of the prevailing mood among consumers before the all-important holiday shopping season.

For retailers and consumer goods makers that are struggling to turn around or to find and maintain solid sales growth, the season could be a make or break. Abercrombie & Fitch ANF, Hewlett-Packard HPQ, J.C. Penney JCP, Staples SPLS and Target TGT could be said to fit into that category, and so the stocks are worth keeping an eye on now.

Here is a quick look at how these companies have fared recently and what analysts expect from them.

See also: Will Aeropostale Be Cool Again?

Abercrombie & Fitch

Like its rivals, Abercrombie faces a challenging teen retail marketplace, and current initiatives include cost cutting, new offerings and global expansion. Abercrombie's market capitalization is more than $3 billion and its dividend yield is near two percent. Its long-term earnings per share (EPS) growth forecast is about 18 percent, but its price-to-earnings (P/E) ratio is much higher than the industry average. Short interest is almost 24 percent of the float.

The consensus recommendation of the analysts surveyed by Thomson First Call is to hold shares, though it has more Buy ratings than two months ago. Shares pulled back nine percent in July, but they have recovered since and are now up more than 30 percent year to date. The stock has outperformed peers Aeropostale and American Eagle Outfitters over the past six months.

Hewlett-Packard

While the company has moved toward enterprise services, it still relies on printers and PCs for much of its revenue. It has a market cap of more than $71 billion and a dividend yield of about 1.8 percent.
The operating margin is better than the industry average, and the return on equity is more than 18 percent.

Of the 34 analysts surveyed, fewer than half of them recommend buying shares, but only one rates the stock at Underperform. After climbing more than 37 percent year-to-date, shares reached a new multiyear high last Wednesday. Over the past six months, the stock has handily outperformed the broader markets.

J.C. Penney

As Barron's pointed out this week, despite signs of a turnaround, "a lot of work" remains for J.C. Penney. It has a market cap of more than $3 billion, but note that its operating margin and return on equity are still in the red. Also, short interest is more than 27 percent of the float.

For at least three months, the consensus recommendation has been to hold shares. There are more Underperform ratings than Buy recommendations. Though the share price has spent much of this year bouncing between $8 and $10, it recently broke higher and is now up more than 21 percent year to date. The stock has outperformed Kohl's, Macy's and Target in the past six months.

Staples

The specialty retailer teamed up with Katy Perry and Nickelodeon for back-to-school promotions, but also recently warned of weak sales in the current quarter. Its dividend yield is about 4.2 percent, and the market cap is more than $7 billion. Its P/E ratio is less than the industry average, and short interest is about 12 percent of the float.

None of the 19 analysts polled recommend buying shares, which has been the case for at least three months. Shares have been trading not far above the 52-week low, and the stock is still down about 25 percent year to date. Over the past six months, Staples has underperformed competitors Office Depot and Amazon.com.

See also: 3 Retail ETFs To Consider Heading Into Year-End Sales

Target

Target's disappointing second-quarter results and lowered guidance show that it has a ways to go before it recovers from last year's massive cyber breach. The $38 billion plus market cap company has a dividend yield near 3.4 percent and a P/E ratio less than the industry average, but the return on equity is less than 10 percent.

Analysts on average recommend holding Target shares, and they have for at least three months. The share price is about five percent lower than at the beginning of the year. The stock has underperformed competitor Wal-Mart and the broader markets over the past six months.

At the time of this writing, the author had no position in the mentioned equities.

Keep up with all the latest breaking news and trading ideas by following Benzinga on Twitter.