Wall Street Turns More Bullish on WalMart’s Upcoming Earnings

Highlights 

• WalMart is expected to report its fiscal Q1 results on Thursday. 
• A Deutsche Bank analyst expects the retailer to outperform expectations. 
• WalMart is poised to benefit from a weaker consumer spending environment given its discount pricing model. 

Retailers are in the spotlight as the Q1 earnings parade continues this week. Among them, WalMart is set to unveil its quarterly results on Thursday, and Wall Street is bullish. WalMart, a dividend-paying stock, is up close to 8% year-to-date. 

WalMart’s Q1 outlook calls for EPS in the range of $1.25-$1.30. Analysts are expecting better, with Jefferies calling for $1.34. According to FactSet, the consensus estimate on WalMart’s EPS is $1.31. 

Deutsche Bank’s Bullish Call 

According to CNBC, Deutsche Bank published a report naming the big-box retailer as the leader of the retail pack. Analyst Krisztina Katai recongized WalMart as her “top pick” thanks to “sales momentum and ability to start growing EBIT margin through a multi-year time frame.”

Katai expects both WalMart and its Sam’s Club subsidiary to outperform expectations. The analyst is so convinced that WalMart will impress that she increased her estimates on the retailer’s same-store sales growth to 6%, up from a previous expectation of 5.5%, and on Sam’s Club to 8.5% from a prior estimate of 6.8%. 

FactSet’s estimate calls for Walmart to report a 5.4% increase in its same-store sales year-over-year.

Retailers have been keeping inventories under control, and food inflation appears to be easing. In addition, WalMart stands to benefit from the uncertainty in the economy as consumers seek out discount pricing for essential items. Credit card spending fell 1.2% last month vs. the year-ago period, according to Bank of America data. 

Katai expects WalMart’s management could move to increase their full-year earnings forecast to be more closely aligned with consensus estimates of $6.05-$6.15 per share. Currently WalMart’s full-year outlook is for EPS of $5.90-$6.05. 

Other Retail Earnings on Deck

In addition to WalMart, other retailers on deck to report their quarterly results include Target, Home Depot and Lowe’s. Analysts are reportedly more cautious about the upcoming results for home-improvement retailers as consumers remain under pressure due to economic headwinds.