Walmart’s Cautious Outlook Impacts Market as Target’s Q4 Report Approaches
This week, the market seemed to lose its momentum after Walmart WMT issued a cautious forecast alongside its fourth-quarter results released on Thursday.
With an upcoming wave of retail earnings reports, investors are particularly eager for Target’s TGT Q4 report scheduled for Tuesday, March 4.
Walmart’s Fourth Quarter Performance
Walmart’s Q4 sales grew by 4% year-over-year, reaching $180.55 billion compared to $173.38 billion in the same quarter a year ago. This result slightly exceeded sales predictions of $180 billion. CEO Douglas McMillon stated that Walmart is gaining market share across diverse consumer demographics.
The company also reported a 10% increase in earnings per share (EPS), rising to $0.66 from $0.60 a year earlier, surpassing the expected EPS of $0.65. Despite this success, McMillon warned of uncertainties in consumer behavior and global economic conditions. Notably, Walmart has met or exceeded earnings expectations for 11 consecutive quarters, averaging a 7.36% surprise across its last four quarterly reports.
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Expectations for Target’s Upcoming Report
Analysts at Zacks project that Target’s Q4 sales will decline by 3% to $30.73 billion from $31.92 billion over the same period last year. Following a challenging competitive landscape, earnings are expected to drop to $2.24 per share, down from Q4 EPS of $2.98 a year ago.
Target has only met bottom-line expectations in two of its last four quarterly reports and recently missed its Q3 EPS forecast by 19%, reporting earnings of $1.85 per share against a consensus estimate of $2.29.
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Comparing Outlooks for Walmart and Target
Walmart reported total sales of $680.99 billion for fiscal 2025, up by 5%. Additionally, annual earnings increased by 13% to $2.51 per share, an improvement from EPS of $2.22 in FY24. For fiscal 2026, Walmart projects net sales to grow between 3-4%. This aligns with Zacks’ forecast of approximately $702.4 billion and reflects just over 3% growth.
However, Walmart’s EPS guidance of $2.50-$2.60 for FY26 falls short of the Zacks Consensus estimate of $2.74, which implies 9% growth.
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Conversely, Target is expected to report total sales of around $106.38 billion for FY25, a decline of roughly 1%. Its annual earnings are anticipated to fall by 3% to $8.69 per share from EPS of $8.94 in FY24.
Looking ahead, Target’s sales may stabilize with an expected growth of 2% to $109.09 billion in FY26. Additionally, annual earnings are anticipated to rebound by 7% in FY26 to reach $9.32 per share.
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Stock Performance Comparison
In terms of stock performance, Walmart’s shares have increased by over 60% in the past year, outpacing the S&P 500’s 21% rise, while Target’s stock has declined by 17%.
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Issues like shrink and inventory management have affected Target’s performance lately. Notably, Target’s stock currently trades at its lowest valuation in over a decade, at 13.7X forward earnings, in contrast to Walmart’s 35.4X forward earnings and the benchmark’s 23.1X.
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Conclusion
Investors searching for value may consider Target’s stock, which offers a more attractive price-to-earnings (P/E) valuation than Walmart. Meanwhile, Walmart’s impressive growth cannot be ignored. Both stocks currently hold a Zacks Rank of #3 (Hold). While both companies present opportunities for long-term investors, it may be wise to wait for better buying conditions in light of recent market fluctuations.
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Target Corporation (TGT) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
