Walmart trades at 37.6 times earnings and has to deliver this week

The reporting season in American retail reaches its decisive phase this week. Home Depot reports on Tuesday morning, Target on Wednesday and Walmart on Thursday, 20 August.

For Walmart more is at stake than the numbers alone. The share is currently valued at 37.6 times the earnings estimated for the coming twelve months, only just below its high of the past ten years.

A valuation at that level requires results that do not merely meet expectations but beat them. Otherwise the premium has no justification.

The short version

• Walmart is valued at 37.6 times the earnings estimated for twelve months, close to its high of the past ten years.
• Home Depot reports on Tuesday, Target on Wednesday and Walmart on Thursday, 20 August.
• Over five years Walmart gained more than 130 percent, Amazon 60.8 percent, Home Depot 2.1 percent, while Target lost 40.9 percent.

Good numbers were not enough last time

That pattern has already shown itself. After the previous release on 21 May the share fell, even though the company had clearly beaten estimates for earnings per share, revenue and comparable store sales.

What weighed then was that management merely confirmed its existing guidance instead of raising it. The market read that as caution.

Over five years Walmart is nevertheless the clear winner among the large retail groups. The share gained more than 130 percent. Amazon reached 60.8 percent and Home Depot 2.1 percent, while Target lost 40.9 percent. The S and P 500 rose 77.7 percent over the same period.

This year the share has lost momentum even though the operating business continues to run strongly. Revisions to analyst estimates show a slightly negative tendency ahead of the release.

Fuel costs weigh from both sides

The environment is difficult for large format retailers, and for a reason that works from both directions.

High fuel costs first weigh on households and reduce their room for other spending. At the same time they raise the costs of the retailers themselves, because goods have to be transported and stores have to be supplied.

The connection is easy to follow at the moment. The premium for European diesel over crude has risen from around 25 dollars a barrel at the start of the year to more than 70 dollars, because refining capacity in the Middle East is missing. Crude itself trades far below its wartime high.

That burden is likely to have played a part in the weak retail sales for July that were published on Friday.

Target under pressure, Home Depot tied to housing

At Target analysts expect earnings below the year earlier figure. The company has been regarded as the laggard of the group for some time.

Home Depot hangs above all on the housing market. The chain sells material and fittings for conversions and repairs, which is why demand depends heavily on whether people buy and renovate houses.

For reading the state of consumption, Target will be the most telling of the three. The company serves broad categories beyond basic necessities and therefore shows more quickly whether households are cutting back.

Amazon, Micron and Alphabet are also in focus

Alongside the retail groups the data service Zacks lists Amazon, Micron and Alphabet this week as stocks where earnings surprises are likely.

Micron had already gained 3.5 percent before the open on Monday, after a revenue forecast from Anthropic for 2028 of around 190 to 200 billion dollars supported the stocks tied to artificial intelligence.

So the same week brings together what currently drives the American market. On one side technology stocks whose valuation rests on expectations about artificial intelligence. On the other retail groups whose numbers show how much money households actually spend.

Frequently asked questions

Why is a good quarter not enough for Walmart

The share is valued at 37.6 times expected earnings. A valuation at that level requires results that do not merely meet expectations but beat them. After the release on 21 May the share fell even though all estimates were beaten, because guidance was only confirmed and not raised.

How do fuel costs weigh on retail

They work from two sides. High fuel costs reduce the room households have for other spending and at the same time raise the costs of retailers, because goods have to be transported and stores supplied. The premium for European diesel over crude rose from around 25 to more than 70 dollars a barrel.

Which of the three retailers says most about consumption

Target is the most telling. The company serves broad categories beyond basic necessities and therefore shows more quickly whether households are cutting back. Home Depot by contrast hangs above all on the housing market.

This analysis is for information only and is not investment advice.