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May 17, 2021, 7:52 a.m. EDT

Walmart earnings preview: Rival Target likely saw more benefit from stimulus spending

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Tonya Garcia

Walmart Inc. is scheduled to report fiscal first-quarter earnings on Tuesday before the opening bell, and Cowen says there’s a good chance that rival Target Corp. got a bigger boost from recent government stimulus spending.

To be sure, Cowen analysts raised its own estimates for Walmart /zigman2/quotes/207374728/composite WMT +0.46% and expects the checks paid to Americans by the government to be a tailwind for the retail giant.

But Cowen says Target /zigman2/quotes/207799045/composite TGT +1.47% is “better positioned” for the near-term due to its wide range of merchandise.

“Target likely saw a bigger lift from stimulus than Walmart given its more discretionary bent,” analysts led by Oliver Chen wrote.

Read: Kroger and Ocado bring bots to new hi-tech facility as digital competition among grocers heats up

“Target operates a more diversified category portfolio with a higher mix of discretionary categories as grocery is 20% of mix vs. 57% at Walmart. Category mix should yield more robust comps at Target as the economy continues to re-open.”

Cowen rates Walmart stock outperform with a $179 price target, and rates Target stock outperform with a $230 price target.

Target is scheduled to report its first-quarter earnings on Wednesday before the opening bell.

JPMorgan analysts agree that Walmart’s grocery reliance could pose a challenge compared with a different competitor, Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +1.49%

“[W]e find the valuation full and believe that the hardest part is ahead with its high share in the hyper-competitive grocery market (25% share) and low share in general merchandise (~6%) where Amazon dominates online,” JPMorgan wrote.

“COVID-19 should only accelerate curbside and delivery investments from its grocery peers while the CPG [consumer packaged goods] category likely just experienced an inflection online.”

JPMorgan rates Walmart stock neutral with a price target of $148.

Walmart has an average overweight stock rating and average price target of $158.08, according to 35 analysts polled by FactSet.

See: Grocery Outlet’s inability to grow online is a ‘competitive disadvantage’ that will be hard to overcome

Here are other items to watch for when Walmart reports its quarterly results:

Earnings: The FactSet consensus is for earnings per share of $1.21, up from $1.18 last year.

Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects EPS of $1.28.

/zigman2/quotes/207374728/composite
US : U.S.: NYSE
$ 137.03
+0.63 +0.46%
Volume: 6.37M
June 22, 2021 4:00p
P/E Ratio
31.86
Dividend Yield
1.61%
Market Cap
$382.21 billion
Rev. per Employee
$243,109
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/zigman2/quotes/207799045/composite
US : U.S.: NYSE
$ 237.21
+3.44 +1.47%
Volume: 2.90M
June 22, 2021 4:02p
P/E Ratio
19.36
Dividend Yield
1.52%
Market Cap
$115.65 billion
Rev. per Employee
$228,756
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/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,505.44
+51.48 +1.49%
Volume: 3.35M
June 22, 2021 4:00p
P/E Ratio
66.71
Dividend Yield
N/A
Market Cap
$1741.91 billion
Rev. per Employee
$297,430
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