(Bloomberg) -- It could be shaping up to be a good week for Walmart Inc. investors. Even as the company grapples with mounting criticism of its gun-sales policies and concerns over looming tariffs, analysts are predicting a pretty good report.

JPMorgan’s Christopher Horvers expects the company to raise its fiscal 2020 earnings forecast, including Flipkart, to “slight” growth from its previous view of a low-single-digit decline. He isn’t expecting a change to the year comparable sales forecast, which currently stands at 2.5% to 3.0% growth.

Analysts are mixed on comparable sales, with some expecting them to beat estimates and others expecting them to be in-line, but one expectation is clear: U.S. results will outperform international ones, with John Zolidis of Quo Vadis Capital predicting the 19th straight quarter of positive store traffic.

E-commerce sales performance in the U.S. will be closely watched. Telsey Advisory estimates a 37% year-over-year gain, which would match the first-quarter growth. Bank of America is looking for a 35% advance, and Zolidis predicts a rise of at least 30%. In addition, analysts may have lingering questions around tariffs, even as the Trump administration said Tuesday it will delay until mid-December the 10% tariff on some Chinese products.

Here are additional comments that Wall Street analysts made ahead of Thursday’s earnings:

Morgan Stanley, Simeon Gutman

  • Gutman says most investors seem to be expecting a full-year guidance boost, but he thinks Walmart may maintain its forecast due to sensitivity around raising earnings expectations on the back of higher consumer prices and impending higher costs
  • Gutman also expects a “slight” EBIT decline for the quarter, while investors may be looking for EBIT growth; he sees a return to U.S. EBIT growth and margin expansion in the second half of the year
  • Rates overweight, with a price target of $115 per share

Telsey Advisory, Joseph Feldman

  • U.S. comp. sales strength should be driven by a favorable macro environment, investments in prices, improvement in produce freshness, merchandising enhancements and advancements in supply chain and operations
  • On the other hand, the analyst expects International comparable sales to fall 1.5% amid currency pressure, softness in U.K. due to Brexit, and the deconsolidation of the business in Brazil, partly offset by the addition of Flipkart in India
  • Rates outperform, price target of $118

Quo Vadis Capital, John Zolidis

  • “We see some room for upside to the Street estimates for the quarter (although our model is similar) and also for the company to raise its full-year outlook”
  • Walmart should report the 19th consecutive quarter of positive traffic at stores
  • E-commerce, which is becoming a larger contributor to reported same-store sales growth, should gain at least 30% year-over-year
  • Continues to see WMT shares as “a long” ahead of results

What Bloomberg Intelligence says:

“Walmart’s focus on improving store operations and investing in lower prices should help support 2Q same-store sales growth, aided by a rapidly expanding online grocery service.”

“Walmart’s gross margin may contract modestly on investments in lower prices, technology and e-commerce efforts.”-- Jennifer Bartashus, senior packaged food & retail staples analyst-- Click here for the research

Bank of America, Robert Ohmes

  • The strong low-income consumer backdrop and likely continued momentum in general merchandise (apparel and home) and fresh food could support potential EPS and comp. sales upside
  • Estimates 35% U.S. e-commerce growth; continued e-commerce momentum, supported by the expansion of online delivery and grocery pick-up locations
  • Estimates EBIT to decline 6.5% in 2Q as gross margin pressures from digital mix shifts, price investments and Flipkart offset expense leverage
  • Rates buy, price target $120; notes continued strength in the U.S. segment

JPMorgan, Christopher Horvers

  • Sees possibility for EPS to beat consensus from potential operating margin outperformance, driven by SG&A saving efforts; expects year EPS forecast to be raised
  • But Horvers expects an in-line comp. result “at best,” with weather hurting both the month of May and the first half of June
  • Rates neutral, with a price target of $110

Just the Numbers

  • 2Q adjusted EPS estimate $1.22 (range $1.17-$1.30)
  • 2Q revenue estimate $130.1 billion (range $128.4 billion to $132 billion) (Bloomberg data)
  • Preliminary 2Q same store sales excluding gas and FX impact estimate +2.0% (Consensus Metrix, average of 11 estimates)
    • Preliminary Walmart U.S. excluding gas: +2.5% (average of 22 estimates)
    • Preliminary Sam’s Club: +0.6% (average of 18 estimates)
  • Walmart provided the following fiscal 2020 targets in February:
    • EPS: decline by a low single-digit percentage range compared with FY19, including Flipkart
      • Increase by low to mid single-digit percentage range, excluding Flipkart
    • Consolidated operating income: decline by a low single-digit percentage range, including Flipkart
      • Increase by a low single-digit percentage range, excluding Flipkart
    • Consolidated net sales growth of at least 3% in constant currency
    • Walmart U.S. comp. sales growth up 2.5%-3%, excluding fuel
    • Sam’s Club comp. sales growth around 1%, excluding fuel; around 3%, excluding fuel and tobacco
    • Walmart U.S. e-commerce net sales growth of around 35%

Data

  • 19 buys, 15 holds, 2 sells; average price target $112
  • Implied 1-day share move following earnings: 4.9%
  • Shares rose after 7 of prior 12 earnings announcements
  • Adjusted EPS beat estimates in 11 of past 12 quarters
  • Shares are up 20% in past 12 months vs SPX Index up 3.7%

Timing

  • Earnings release expected 7 a.m. New York time on Aug. 15

To contact the reporter on this story: Janet Freund in New York at jfreund11@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm, Morwenna Coniam

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