Time to Buy Walmart or Target Stock as Q3 Earnings Approach?
In This Article:
Walmart has reached or exceeded the Zacks EPS Consensus for nine consecutive quarters, posting an average earnings surprise of 6.89% in its last four quarterly reports. Target has surpassed the Zacks EPS Consensus in three of its last four quarterly reports, posting an average earnings surprise of 20.26%. (Source: Zacks Investment Research)
Walmart's stock has soared +60% year to date, outperforming the S&P 500's +23% and Target's +10%. (Source: Zacks Investment Research)
Walmart's Q3 sales are expected to be up 4% to $167.49 billion, with EPS projected to increase 4% to $0.53. Target's Q3 sales are expected to increase 2% to $25.94 billion, with EPS expected to rise 9% to $2.29. (Source: Zacks estimates)
Target has a higher dividend yield of 2.95%, compared to Walmart's 0.99% and the S&P 500's 1.22% average. (Source: Zacks Investment Research)
Target's stock trades at 15.9X forward earnings, a discount to the S&P 500's 24.8X and Walmart's 34.4X. Target's valuation is also below its decade-long high and median, while Walmart trades at its decade-long high. (Source: Zacks Investment Research)
Third-quarter results from retail giants Walmart WMT and Target TGT will be a highlight of this week’s earnings lineup.
Both omnichannel retailers are expected to post sound quarterly growth with Walmart and Target set to release their Q3 reports on Tuesday, November 19, and Wednesday, November 20, respectively.
Walmart Q3 Expectations
Based on Zacks estimates, Walmart’s Q3 sales are expected to be up 4% to $167.49 billion. On the bottom line, Walmart’s Q4 EPS is projected to increase 4% as well to $0.53 versus $0.51 a year ago.
Walmart most recently surpassed Q2 earnings expectations by 3% in August with EPS at $0.67 compared to estimates of $0.65. Notably, Walmart has reached or exceeded the Zacks EPS Consensus for nine consecutive quarters posting an average earnings surprise of 6.89% in its last four quarterly reports.
Image Source: Zacks Investment Research
Target Q3 Expectations
Starting to reach its goals of curving inventory shrink, Target’s Q3 sales are projected to increase 2% to $25.94 billion. More importantly, Target’s Q3 EPS is expected to rise 9% to $2.29 versus $2.10 in the comparative quarter.
Target most recently beat Q2 EPS estimates by nearly 19% in August with earnings at $2.57 per share compared to expectations of $2.16. Target has surpassed the Zacks EPS Consensus in three of its last four quarterly reports posting a very impressive average earnings surprise of 20.26%.
Image Source: Zacks Investment Research
Tracking WMT & TGT:
Price Performance
Thanks to its low-cost offerings, consumers have gravitated toward Walmart amid higher inflation in recent years with the company also seeing considerable expansion in its online sales. This has been a primary catalyst to Walmart’s enhanced financial performance and ability to take market share with WMT soaring +60% year to date compared to the benchmark S&P 500’s +23% and Target’s +10%.
Image Source: Zacks Investment Research
Valuation Comparison
While Walmart’s stock has had a clear edge in terms of price performance, Target shares have stood out in terms of valuation. To that point, Target’s stock trades at 15.9X forward earnings which is a pleasant discount to the benchmark’s 24.8X with Walmart at 34.4X.
Furthermore, Target trades nicely beneath its decade-long high of 30.4X forward earnings and at a slight discount to its decade-median of 16.2X. As for Walmart, WMT trades on par with its own decade-long high of 34.7X but above the median of 22X during this period. Reassuringly, Walmart and Target both trade at the optimum level of less than 2X sales.