Walmart and Target earnings preview

Retail giants Walmart (NYSE: WMT) and Target (NYSE: TGT) are scheduled to report quarterly earnings Tuesday morning and Wednesday morning, respectively. Investors will be looking at the report for signs of momentum, particularly at Walmart as shares are down 4.5% since the start of 2021. Target stock on the other hand is up around 20% in 2021 and a strong earnings report could lift TGT stock above its recent all-time high of $217.39.

WMT, TGT numbers to watch

Walmart is expected to report $132.30 billion (£93.83 billion) of revenue and $1.21 of earnings per share in the fiscal first quarter, according to the FactSet consensus. By comparison, the Bentonville-based company reported revenue of $134.62 billion and EPS of $1.18 in the same quarter last year.

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Forecasts for Target, on the other hand, stand at $21.55 billion for revenue and $2.14 of earnings per share. This compares to $19.60 billion of revenue and 59 cents of adjusted EPS in the same quarter of fiscal 2020.

Analyst: Target has better momentum

Cowen analysts continue to hold a bullish stance on both Walmart and Target with an “Outperform” rating on both names. But Target may hold the upper advantage for two key reasons.

First, Cowen analysts believe that recent government stimulus spending will provide a greater lift to Target than Walmart. Second, Cowen’s “Walmart+ Deep Dive” survey indicates Walmart’s subscription platform Walmart+ saw its users decline from 13 million in February to 11.1 million in March.

Foot traffic data: WMT vs TGT

Almanac is a platform that leverages AI to measure and predict consumer behavior through billions of data points. According to data derived from Almanac, we can see that Walmart’s reported quarter started off on a strong note with an increase in visits through the week starting Feb. 20. However, visit trends reversed course and trended into negative territory.

As we can see in a similar chart below, data from Almanac shows Target visit trends ended the reported quarter with a gain in traffic. Investors should be paying attention to both earnings reports as the opposite trends may mean Target won market share from Walmart. Based on Cowen analysts’ findings that Walmart is losing momentum in its online subscription service, it may be possible that Target is very much gaining traffic at the expense of Walmart. Investors would be wise to look for confirmation either way in the upcoming earning reports.

Najarian: TGT ‘still has room to outperform’

Commenting on why TGT stock has outperformed WMT stock, CNBC personality and notable trader Peter Najarian said on “Halftime Report”:

“I think it comes down to digital sales and all these different things that Target’s been doing, that everybody’s been trying to do as well, but Target’s execution has been exceptional. If you compare Target’s margin with that of Walmart’s, it’s not even close because Target has only 20% of its business model in the grocery section. So, it continues to do these partnerships. It continues to do the right thing, and from almost every perspective, Target still has room to outperform”.