Baird Weighs In on Two Retailer Giants: Wal-Mart Stores, Inc. (WMT), Target Corporation (TGT)

Baird analyst Peter Benedict provides updates on retail giant Wal-Mart Stores, Inc. (NYSE:WMT) and discount retailer Target Corporation (NYSE:TGT), as the the next key milestone for the companies will be their first-quarter earnings results this week. Let’s take a closer look.

Wal-Mart Stores, Inc.

In anticipation of first quarter results on Thursday 5/19, Baird’s Peter Benedict reiterated an Outperform rating on shares of Wal-Mart with a price target of $70.

Benedict expects another quarter of GM expansion due to lower transportation costs, improved shrink and a reduction in low-margin fuel sales at Sam’s through ongoing investments in people and technology. In all, Benedict’s models assume consolidated EBIT dollars down ~16%.

Benedict believes that efforts to enhance the customer experience and support store associates through increased wages and training should help Wal-Mart maintain positive traffic and expects that food deflation will remain an average ticket headwind. Despite momentum with Club Pickup, Benedict modeled “flattish core comps (in line with guidance” at Sam’s as “management’s merchandising transformation remains in the early stages.” Additionally, he expects softer consumer spending in April. According to Benedict, management is focused on reinvigorating growth through significant assortment expansion, faster delivery times, and the expansion of online grocery. Following improvements, Benedict expects sales trends to “remain in focus.” 

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Peter Benedict has a yearly average return of 8.4% and a 67% success rate. Benedict has an 3% average return when recommending WMT, and is ranked #707 out of 3910 analysts.

Out of the 8 analysts polled by TipRanks (in the past 3 months), 1 analysts rates Wal-Mart Stores stock a Buy 5 rate the stock a Hold and 2 analysts rate the stock a Sell. The stock’s consensus target price is $68, marking a potential upside of 3%.

Target Corporation

In addition, Benedict reiterated a Neutral rating on shares of Target Corporation with a price target of $75, as the company is scheduled to report its first earnings results tomorrow (5/18) before the market open.

Benedict expects EPS $1.20, which matches the Street’s and compares to the $1.15-$1.25 plan. Further, 1Q comps could be affected by the recent strength in signature categories and early benefits from assortment localization initiatives. The guidance assumed a slight SG&A pressure and cost-out efforts suggest potential conservatism in the estimates. Overall, the EBIT/EBITDA margin assumptions are in line with guidance but reflect a modest 1%-dollar growth.

Looking ahead, Benedict would be “surprised” to see any material change to GTG’s FY16 EPS of $5.20-$5.40 at this point in the year. While balancing sales and gross margin is a “challenging task given a heightened competitive environment,” cost-outs and incremental buybacks seem sufficient for now to support Target’s FY16 EPS plan.

Benedict says that CEO Brian Cornell has “successfully refocused the organization on core retail fundamentals, and the results thus far have been solid/encouraging.” Benedict sees further opportunities to drive sales productivity through store remodels and food repositioning as well as enhancing operations through supply chain/fulfillment. In light of positive future opportunities, Benedict remains concerned that the intense competitive backdrop keeps the risk/reward profile on share relatively balanced.

Out of the 12 analysts polled by TipRanks (in the past 3 months), 4 analysts are Bullish on Target Corporation, 7 are neutral on the stock, and 1 analyst is Bearish on the stock. The stock’s consensus target price is $82.56, marking a potential upside of 10.66%.


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