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Last week’s earnings slate produced two distinctly different standout winners. Dillard’s (DDS - Free Report) ) showed that disciplined merchandising and a cash-heavy balance sheet can still create upside in department-store retail, while Lenovo Group (LNVGY - Free Report) ) demonstrated that its artificial intelligence strategy is expanding well beyond PCs and producing meaningful profit growth.

That said, here’s a look at why investors may want to consider Dillard’s and Lenovo stock after crushing earnings expectations last Thursday.

Dillard’s Q2: Resilient Demand Meets Better MarginsDillard’s delivered fiscal second-quarter earnings of $6.25 per share, crushing consensus EPS estimates of $4.04 by nearly 55% and rising 34% year over year. Net income climbed to $97.7 million from $72.8 million.

Although net sales slipped 0.4% YoY to $1.5 billion and missed consensus by 0.76%, retail sales excluding its construction operation advanced 1%, as did comparable-store sales. Comps also edged past analysts’ 0.9% forecast.

Despite the sales miss, It’s noteworthy that Dillard’s has now exceeded earnings expectations for eight consecutive quarters, with a very impressive average EPS surprise of 35.82% in its last four quarterly reports

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The earnings quality for Q2 does require some context. A $37.2 million tariff refund contributed $1.82 per share and lifted retail gross margin by 260 basis points. Even after subtracting that benefit, Dillard's Q2 EPS was approximately $4.43—still well above the $4.04 consensus.

Reported retail gross margin expanded to 40.9% from 38.1%, while sales were particularly healthy in ladies’ accessories and lingerie, home and furniture. Dillard’s does not anticipate additional significant tariff refunds, making underlying merchandising margins more important in coming quarters.

Management didn't issue formal sales or EPS guidance, but maintained its fiscal 2026 assumptions for depreciation and amortization of $175 million, rentals of $18 million, net interest and debt income of $9 million, and capital expenditures (CapEx) of $120 million. That CapEx target is up from $93 million last year, signaling continued reinvestment despite an uneven consumer backdrop.

Dillard’s balance sheet remains the chief attraction, ending Q2 with roughly $1.26 billion in cash and short-term investments after repaying $96 million of debt. Its current ratio stands at 3.03, indicating Dillard’s has more than twice the amount of assets to liabilities.

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Plus, Dillard’s return on equity (ROE) is nearly 32%, and shares trade at a very reasonable 16X forward earnings multiple, with FY26 EPS now expected to rise 6% to $35.26. Investors should nevertheless monitor the 5% inventory increase and a 70-basis-point rise in operating expenses as a percentage of sales during Q2.

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Lenovo’s Q1 Results Highlight AI Infrastructure as a Key Profit EngineLenovo’s results for its fiscal first quarter were even more emphatic. The PC giant posted Q1 earnings of $1.78 per share, crushing the 65-cent EPS consensus by nearly 174%, and soaring from $0.73 a year ago.

This came as revenue surged 43% YoY to a record $26.94 billion, topping expectations of $23.27 billion by almost 16%. Adjusted net income soared 176% to $1.07 billion. A $1.69 billion noncash loss from warrant revaluation resulted in a reported net loss of $609 million, so the adjusted figures provide a clearer view of operating performance.

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Furthermore, AI-related revenue jumped 60% to $9.3 billion, representing 35% of total sales, while gross margin expanded 180 basis points to 16.5%.

Lenovo’s Intelligent Devices Group generated $17.1 billion in revenue, up 27% YoY, and preserved a 7.1% operating margin. More importantly, Infrastructure Solutions revenue nearly doubled to $8.5 billion, producing a record operating profit of $777 million and a 9.1% margin. Most astonishing, Lenovo’s AI-server pipeline reached $54 billion, up 157% sequentially. Solutions and Services added another $2.9 billion in sales, with a record 24.2% operating margin and triple-digit gains in AI-services revenue.

The company’s outlook provides a potent catalyst. Lenovo now expects to reach $100 billion in annual revenue during its current FY27, pulling that milestone forward from its prior two-year timetable.

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Management cited infrastructure demand, device pricing discipline, and expanding services as key supports. The $54 billion server pipeline is not equivalent to firm backlog, but its scale still points to a substantial opportunity in AI computing.

Lenovo stock is no longer a deep-value name after its sharp year-to-date rally (+250 %), but LNVGY still trades at a reasonable 22X forward P/E multiple, and analysts now expect 26% EPS growth in FY27 followed by an 83% earnings surge in FY28, to $6.89 per share.

An improving business mix is particularly encouraging as high-margin services and profitable infrastructure are reducing Lenovo’s dependence on the more cyclical PC market.

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Bottom LineLenovo offers the faster EPS trajectory,  AI exposure, and clearer revenue guidance, while Dillard’s provides a more defensive, cash-rich setup at a lower earnings multiple. 

At the time of this writing, Lenovo stock currently sports a Zacks Rank #1 (Strong Buy), with Dillard’s landing a Zacks Rank #2 (Buy).

Key Takeaways Dillard's expects Q2 revenues to rise, driven by store and e-commerce initiatives.Dillard's fashion-focused assortments and tight inventory management support engagement.Dillard's store remodels and category strength aim to boost productivity and sales. Dillard’s, Inc. (DDS - Free Report) is expected to register a year-over-year top-line increase when it reports second-quarter fiscal 2026 numbers.

The Zacks Consensus Estimate for fiscal second-quarter revenues of $1.5 billion indicates a 0.4% rise from the year-ago reported figure. The consensus estimate for earnings is pegged at $4.04 per share, implying a 13.3% decrease from the year-ago quarter’s reported figure. The consensus estimate has been stable in the past 30 days.

In the last reported quarter, the company registered an earnings surprise of 58.3%. We note that in the trailing four quarters, its bottom line beat the Zacks Consensus Estimate by 27.9%, on average.

Factors Likely to Drive DDS’ Q2 ResultsDillard’s quarterly performance is likely to have benefited from its strategic initiatives and resilient consumer demand. The company’s efforts to capture growth opportunities across its brick-and-mortar stores and e-commerce channels, along with disciplined inventory management, trend-focused merchandise and stronger brand relationships, are likely to have supported sales growth during the quarter under review.

Dillard’s focus on fashion-forward merchandise across apparel, accessories, cosmetics and home is supported by a mix of national and exclusive brands. The company is seeing strength in its merchandise categories, particularly home and furniture, ladies’ accessories and lingerie, and shoes. Tight inventory management and curated assortments are helping drive customer engagement and consistent sell-through.

Dillard’s has also been remodeling stores to enhance the shopping experience and improve store productivity, while optimizing its activewear business and capitalizing on in-demand categories. These initiatives are likely to have broadened the customer base, strengthened engagement and supported overall sales during the fiscal second quarter. Our model predicts a comparable-store sales rise of 0.7% year over year while retail sales are expected to grow 0.5% year over year for the fiscal second quarter.

However, Dillard’s has been witnessing the adverse impacts of a tough operating environment due to the cautious buying behavior of consumers. Additionally, higher expenses are likely to have dented margins and the bottom line in the fiscal second quarter. While we expect SG&A expenses to increase 5% for the quarter under review, the SG&A expense rate is anticipated to expand 130 basis points to 29.6%. Our model predicts a 16.9% year-over-year decline in operating profit for the fiscal second quarter.

Earnings Whispers for DDS StockOur proven model does not conclusively predict an earnings beat for Dillard’s this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Dillard’s currently has an Earnings ESP of 0.00% and a Zacks Rank of 3.

DDS Stock’s Valuation Picture & Price PerformanceDillard’s is trading at a forward 12-month price-to-earnings ratio of 17.81X, higher than the Retail - Regional Department Stores industry’s average of 14.3X. The company is trading below its five-year median of 19.09X.

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The recent market movements show that DDS shares gained 12.3% in the past three months compared with the industry's 22.6% growth.

Stocks With The Favorable CombinationHere are a few companies, which according to our model, have the right combination of elements to come up with an earnings beat this reporting cycle:

Williams-Sonoma, Inc. (WSM - Free Report) has an Earnings ESP of +3.38% and a Zacks Rank of 2. WSM is likely to register a top and bottom-line increase when it reports second-quarter fiscal 2026 numbers. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for quarterly EPS of $2.04 suggests an increase of 2% from the year-ago fiscal quarter’s reported number. The consensus estimate for quarterly revenues is pegged at $1.9 billion, suggesting growth of 4.1% from the prior-year fiscal quarter’s reported figure. WSM has a trailing four-quarter earnings surprise of 7.2%, on average.

Designer Brands Inc. (DBI - Free Report) currently has an Earnings ESP of +0.03% and a Zacks Rank of 2. The company is expected to register a top-line increase when it reports second-quarter fiscal 2026 results.

The consensus mark for revenues is pegged at $743 million, indicating a rise of 0.4% from the figure reported in the year-ago quarter. The Zacks Consensus Estimate for quarterly EPS of 25 cents suggests a drop of 26.5% from the year-ago quarter. DBI has a trailing four-quarter earnings surprise of 112.8%, on average.

American Eagle Outfitters (AEO - Free Report) currently has an Earnings ESP of +2.23% and a Zacks Rank of 2. AEO is likely to register a top-line increase when it reports second-quarter fiscal 2026 numbers. The consensus estimate for quarterly revenues is pegged at $1.4 billion, suggesting growth of 6.5% from the prior-year fiscal quarter’s reported figure.

The Zacks Consensus Estimate for quarterly EPS of 21 cents suggests a decrease of 53.3% from the year-ago fiscal quarter’s reported number. AEO has a trailing four-quarter earnings surprise of 48.5%, on average.