Buy Target or Walmart Stock After Beating Q3 EPS Expectations?

Walmart and Target both beat Q3 EPS expectations—Target reported $1.78 versus $1.76 consensus with sales down about 1% to $25.27 billion, while Walmart posted $0.62 versus $0.61 and sales rose 6% to $179.49 billion—highlighting Walmart’s e-commerce-driven strength vs. Target’s discretionary weakness. Walmart raised fiscal‑2026 net‑sales growth guidance to 4.8–5.1% (from 3.75–4.75%) and lifted operating‑income guidance to 8.5–9.5%, while Target trimmed the top end of its FY26 EPS range to $7.00–$8.00, gave no revenue guidance and signaled holiday caution despite gains in food, beverage and digital. With recent EPS estimate trends showing more downside risk for Target and modest upside for Walmart, both stocks retain a Zacks Hold but the fundamental and guidance divergence makes Walmart the more compelling near‑term investment case.

Analysis

Target and Walmart both reported Q3 results that marginally beat EPS expectations but diverged materially on top-line momentum. Target posted Q3 EPS of $1.78 versus a $1.76 consensus while revenue declined just over 1% year‑over‑year to $25.27 billion, missing the $25.35 billion estimate; Walmart delivered stronger sales and scale, with Q3 revenue up 6% to $179.49 billion (versus $177.14 billion expected) and EPS of $0.62 versus $0.61 consensus, up from $0.58 a year ago.

Guidance and estimate trends highlight a growing bifurcation: Walmart raised FY2026 net sales growth to 4.8%–5.1% (from 3.75%–4.75%) and lifted full‑year operating‑income growth to 8.5%–9.5% (a ~400 bps improvement), while Target trimmed the top end of its FY26 EPS to $7.00–$8.00 from $7.00–$9.00, withheld revenue guidance and cited softness in discretionary categories despite strength in food, beverage and digital.

Analyst‑revision and sentiment signals support a cautious positioning: Target faces a 17% EPS step‑down from FY25 and recent downward revisions (FY27 estimates off ~6%), whereas Walmart shows modest upward FY26 estimate movement and stronger unit economics from e‑commerce expansion. Both stocks retain a Zacks Rank #3 (Hold), so near‑term upside hinges on holiday sales, margin recovery and continued positive EPS revisions for Walmart or stabilization of revisions for Target.

Key Decisions for Investors

• Consider a relative overweight in WMT versus TGT given Walmart's 6% Q3 revenue growth, EPS beat and raised FY26 net‑sales and operating‑income guidance
• Avoid increasing exposure to TGT until management provides revenue guidance or until EPS revisions stabilize and holiday discretionary trends improve, though selectively consider TGT for income-focused positions given its cheaper valuation and more attractive dividend
• Monitor near‑term catalysts closely—holiday comps, same‑store and digital sales trends, operating‑income/margin updates and the next round of FY26/FY27 EPS revisions—and use those data points to reassess positioning
• Maintain neutral core exposure to both (consistent with Zacks Rank #3) and size new positions conservatively or hedge them until clearer evidence of sustainable top‑line and margin momentum emerges