Walmart (WMT) Kicks Off Busy Stretch of Retail Earnings

Retail results start to roll in this week, with heavyweight Walmart's (WMT, $150.80) earnings kicking things off bright and early Tuesday morning.

Given WMT's standing in the retail space, its quarterly results will give Wall Street a closer look at consumer behavior over the May-July period – a stretch of time that included the first batch of monthly child tax credit payments.

In May, the big-box retailer reported stronger-than-anticipated adjusted earnings per share (EPS) and revenues, thanks in part to the third round of stimulus checks that were sent out in March. E-commerce sales were also a strong part of Walmart's first-quarter earnings report, surging 37% year-over-year (YoY) – even amid tough comparisons from the onset of the pandemic.

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Jefferies analyst Stephanie Wissink (Buy) is encouraged by Walmart's e-commerce initiatives, which include expanding its marketplace and providing additional delivery options. This "should drive continued robust e-commerce growth, especially in today's environment," she writes in a note to clients.

"We expect WMT to report a slight second-quarter beat," Wissink adds. "Inbound interest has increased as of late, which we attribute to investor focus on expected benefits of the broader WMT model – resiliency through inflation and economic cycles, a pandemic beneficiary, transforming omni-channel ecosystem and recent data points supporting a grocer share recovery."

Sharing this optimism toward Walmart's earnings is Deutsche Bank analyst Krisztina Katai, who has a Buy rating on the retail stock.

"We are constructive on WMT into the print as we see upside to both the top-line and EPS given the overall strength of the consumer, pent-up demand for back-to-school shopping season, sustained food at home consumption and the tailwind of child tax credit payments in the back half of July," she says.

Overall, analysts are expecting WMT to post earnings of $1.56 per share in its second quarter, flat on a year-over-year basis. Revenues, meanwhile, are projected to arrive at $136.7 billion, a 0.7% decrease from what Walmart brought in this time last year.

Tough Comps Shouldn't Slow Home Depot Down

Home Depot (HD, $334.65) is also slated to report earnings ahead of the Aug. 17 open. Like Walmart, HD is facing tough year-over-year comparisons, considering the shutdown in Q2 2020 left many people with ample time for home improvement projects.

"The home and land improvement retailers are clearly facing tough comparisons for the remainder of 2021, but valuation levels have come back down some relative to this spring," says Raymond James analyst Bobby Griffin, who maintains an Outperform rating (equivalent of Buy) on HD shares.

Even with the difficult comps, "U.S. housing demand and the key fundamentals of the home improvement industry are highly attractive," Griffin adds. "And the U.S. consumer has a higher than typical level of excess savings that continues to be a tailwind for demand."

He notes HD's "solid cash flow" that can be used for ongoing buybacks, and expects "momentum to remain favorable across the period and to be driven by all product categories posting solid gains."

The majority of Wall Street is bullish on Home Depot – and it's easy to see why, considering shares of the Dow Jones stock are up almost 26% for the year to date and are trading less than 4 percentage points from their mid-May record high of $345.69.

And for the retailer's second quarter, the pros are calling for adjusted EPS of $4.43 (+10.2% YoY) and revenues of $40.7 billion, a 6.8% improvement from the year prior.

Cisco Expected to Report Modest Growth

Cisco Systems (CSCO, $56.12) is one of a handful of non-retailers reporting earnings this week, with the network equipment specialist unveiling its fiscal fourth-quarter earnings after the Aug. 18 close. The stock has put in a solid performance on the charts this year, up 25% so far to trade at levels not seen since mid-2019.

Can Cisco's earnings report keep the stock's momentum going?

Analysts are projecting modest improvement from the year-ago period. On the bottom line, the pros are calling for a 2.5% YoY rise to 82 cents per share. As for revenue, the average estimate is for $13.0 billion, up 7.2% on an annual basis.

Raymond James analyst Simon Leopold says recent internal checks on Cisco were varied but tilted toward the positive. "The more bullish checks described a positive inflection back toward data center and campus upgrades delayed by the pandemic," he writes in a note to clients.

However, Leopold, who has an Outperform (Buy) rating on CSCO, suspects the company's recovery phase will be extended into next year.

At CFRA, analyst Keith Snyder will be keeping an eye on the results from Cisco's network security space.

"With $23.58 billion in cash and short-term investments on hand as of May 1, 2021, Cisco has been able to build out its security offerings through acquisitions," he says.

"Our Buy opinion reflects not only our view that the security segment will continue to be a bright spot for the company, but also our expectation the spending on infrastructure platforms will begin to recover after being impacted by the COVID-19 outbreak."