RBC Capital Markets has weighed in on two of the biggest names in US retail ahead of their upcoming earnings reports, offering a split view: steady results for Walmart and a potential beat-and-raise from Target. The investment bank's take, outlined by analyst Steven Shemesh, gives investors a preview of what to watch when both companies report their fiscal third-quarter numbers.
Walmart: steady, but with pressures underneath
For Walmart, RBC expects the quarter to hinge on US comparable sales — a key retail metric that measures revenue growth at stores open at least a year, excluding the impact of new locations. The bank forecasts comparable sales rising 2.9%, roughly in line with Wall Street's consensus, after the prior quarter's pace slowed more than expected.
The backdrop is messy. Lower-income shoppers are feeling pressure, and Walmart is using about $700 million in tariff refunds to keep prices down. Higher fuel costs are also squeezing household budgets, which can affect discretionary spending. Against that backdrop, RBC trimmed its profit forecast to $0.64 in adjusted earnings per share from $0.67.
Still, RBC is slightly more upbeat on revenue, penciling in 4.3% constant-currency sales growth versus 3.9% for the broader market. The firm also suggests Walmart could nudge its full-year sales outlook a bit higher. Constant-currency figures strip out the effect of exchange-rate swings, giving a cleaner read on underlying performance.
Target: clearer upside, but a higher bar
Target is where RBC sees more potential. The bank forecasts third-quarter adjusted earnings per share of $2.25, above the $2.06 consensus, with comparable sales up 4% versus 3.4% expected. RBC also expects Target to lean toward the upper end of its full-year adjusted EPS range of $9.90 to $10.90.
But the bigger focus for investors may not be the headline profit number. RBC flags continued improvement in home, apparel, and general merchandise as key, along with early holiday demand as seen through October and November comparable sales. Those categories have been under pressure as consumers shifted spending toward essentials and services.
Why the beat may matter less than guidance
When a major broker says a beat-and-raise is already the base case, it often means the headline profit figure has less power to move the stock. Investors have partially priced in the good news. That shifts attention to whatever changes the story for the next few months — typically guidance and the freshest read on demand.
For Target, that means the market will likely focus on whether management's outlook clears the higher bar set by institutional investors, rather than simply whether the company beats third-quarter estimates. A raise toward the top of the full-year range could be a positive signal, but if holiday demand looks soft, even a beat might not be enough to lift the shares.
What it means for investors
For everyday investors, the key takeaway is that retail earnings are about more than the bottom line. Comparable sales, guidance, and commentary on consumer health often drive the stock reaction. Walmart's results will offer a read on how lower-income households are coping with inflation and higher fuel costs, while Target's will show whether discretionary spending is recovering.
Both companies are bellwethers for the US consumer, and their reports can move the broader market. Investors should watch for any changes to full-year outlooks, as well as management's comments on tariffs, pricing, and holiday demand. As always, it's important to consider the context: a single quarter's results don't define a company's long-term trajectory, and analyst estimates are just that — estimates.
RBC's note is a reminder that expectations are already high for Target, and the stock may need more than a modest beat to rally. For Walmart, steady results may be enough to reassure investors that the retail giant remains a reliable performer in a challenging environment.
