Why Walmart, Target and TJX Got Such Different Reactions After Earnings

Retail earnings season delivered a clear reminder that good results are not always enough.

Walmart (NASDAQ: WMT), Target (NYSE: TGT) and TJX Companies (NYSE: TJX) all posted solid quarterly numbers recently, but investors reacted to the reports very differently.

For Walmart and Target, strong sales growth was overshadowed by already-elevated expectations and lingering guidance concerns. For TJX, a cleaner setup, stronger outlook and larger buyback plan gave the market a reason to reward the stock.

Walmart: After Its Big Rally, A Strong Quarter Wasn’t Enough

Arguably, the biggest disappointment from the latest round of retail store earnings reports was Walmart. Overall, WMT stock dropped 7.3% after it released earnings on May 21.

But the problem wasn’t that Walmart's business wasn't performing well—it most certainly was. The company saw revenues grow by over 7% year-over-year (YOY), or 5.9% on a constant currency basis, to $177.75 billion. This marked Walmart's fastest revenue growth since calendar Q1 2023. Adjusted earnings per share (EPS) also rose solidly by 8% YOY. Both figures slightly beat Wall Street estimates.

But investors wanted more than a solid quarter. They wanted Walmart to also raise its forward expectations.

Prior to its post-earnings decline, Walmart shares had delivered a total return of approximately 25% over the past six months. This was nearly double the S&P 500’s return of around 13% over the same period.

Walmart, however, maintained its full-year fiscal 2027 outlook. And after the stock’s sharp rally, that decision left investors with little incremental reason to keep bidding shares higher. 

Note that the company’s fiscal reporting period is several quarters ahead of the calendar year period. The company continues to expect full-year adjusted EPS in the range of $2.75 to $2.85. Additionally, Walmart sees adjusted EPS coming in between 72 cents and 74 cents next quarter—slightly below what analysts had projected.

Target: Returns to Growth, But the Stock Still Lost Ground

Target also received no love from investors after its latest report, with shares falling 3.9% afterward.

Notably, Target has gone on an even more impressive run than Walmart, delivering a total return of over 45% in the last six months.

The company recorded net sales growth of 6.7% YOY, with total revenue moving up to $25.44 billion. This ended a five-quarter streak of Target posting negative sales growth and marked the company’s highest growth rate dating back all the way to calendar Q4 2021. Adjusted EPS also ballooned by 32% YOY.

Overall, the company’s sales growth beat estimates moderately, while EPS growth did so by a wide margin.

Target even increased its guidance, doubling its net sales growth expectations from 2% for the full year to 4%. It also sees adjusted EPS coming in at the high end of its $7.50 to $8.50 range. However, the firm also noted that it is facing tougher comparisons in Q2 and more challenging cost headwinds in the first half of the year. This likely tempered investor enthusiasm around Target’s otherwise strong showing.

Still, Target received analyst support, many of whom raised their price targets post-earnings. The average of targets updated after the report was just under $140, considerably higher than the MarketBeat consensus price target around $125. This updated average target implied upside of around 10% in shares.

TJX: Gave Investors the Forward Momentum They Wanted

TJX stood out not only for its strong underlying performance but also for the positive reaction it received from investors.

The company posted revenues of $14.32 billion, an increase of over 9% YOY, TJX’s fastest growth rate in two years. Adjusted EPS rose significantly faster at 29% YOY to $1.19. Both figures exceeded expectations, with TJX posting a large 17-cent bottom-line beat.

TJX also increased its full-year guidance. The company now expects consolidated sales to rise by 5% to 6% YOY, up from its previously forecasted growth of 4% to 5% YOY. Pre-tax profit margin guidance also got a boost, moving up to a midpoint estimate of 11.95%, an increase of 20 basis points over prior estimates. Additionally, EPS growth expectations increased to a range of 7% to 9% YOY from 4% to 6% YOY.

It seems investors were likely more willing to reward TJX because the stock had not previously gone on a strong run like the other two names. Prior to its post-earnings gain, TJX shares were up less than 5% in the past six months. In this case, a lower bar helped, and shares moved up by around 5.6% after the earnings release.

Adding to the positives, TJX announced an increase to its share buyback guidance. This is not a new authorization, but rather TJX telling investors how much it actually plans to spend on buybacks. Overall, the company increased its buyback spending plans by $250 million to between $2.75 billion and $3 billion. After spending $604 million on buybacks during the quarter, this suggests the firm plans to spend around $2.25 billion on buybacks during the rest of the year. This would be equal to approximately 1.3% of its market capitalization.

TJX also received several price target increases after its results. The analyst consensus price target sits around $175, implying about 10% upside from current levels.

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The article "Why Walmart, Target and TJX Got Such Different Reactions After Earnings" first appeared on MarketBeat.