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Walmart Seen Missing Comparable Sales Estimates, Target Set to Beat, Deutsche Bank Says

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Walmart Seen Missing Comparable Sales Estimates, Target Set to Beat, Deutsche Bank Says

Walmart (WMT) is expected to miss second-quarter comparable sales estimates as high gas prices pressure low-income households, while Target (TGT) is seen delivering a beat amid demand strength, Deutsche Bank said in a client note emailed Friday.

Walmart is scheduled to release its results on Aug. 20, while Target reports Aug. 19.

The brokerage expects Walmart to report US comparable store sales growth of 3% to 3.5%, trailing Wall Street's 3.7% consensus.

"Heading into (second quarter) results, expectations are not elevated for the first time in a while, and we see an arguably more balanced set-up than two months ago," Deutsche Bank analyst Krisztina Katai said.

Higher gas prices are impacting lower-income households, while pharmacy-related headwinds have intensified, Katai said. "Pharmacy headwinds will continue through the (second half), and incremental sales upside may be difficult to generate in a cautious and potentially more promotional consumer backdrop," Katai added.

Walmart's underlying business, however, remains healthy amid signs that grocery-led share gains have accelerated, according to the brokerage.

For Target, Deutsche Bank raised its second-quarter same-store sales view, now expecting 2.9% growth, compared with the Street's 2.3%. It boosted Target's earnings estimate to $2.51 per share, above consensus of $2.29, citing "broad-based demand strength."

The retailer's "turnaround progress is reflected in the stock," which has rallied nearly 59% this year, Katai said.

"We remain sidelined until there is greater evidence that recent (same-store sales) momentum reflects sustainable market share gains and improved competitive positioning, rather than cycling easier comparisons," Katai wrote.

Deutsche Bank has hold ratings on both retailers, with a $120 price target on Walmart's stock and a $140 view on Target.

Earlier this week, RBC Capital Markets predicted Walmart will miss second-quarter consensus expectations for comparable sales and Target will deliver a beat.

Price: $114.91, Change: $-0.81, Percent Change: -0.70%

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