Consumer Spending at Retailers Likely Ramped Up Sequentially, Truist Says.

Consumer spending at hardline and broadline retailers likely improved in the third quarter on a sequential basis while Home Depot $Home Depot (HD.US)$ , Lowe's $Lowe's Companies (LOW.US)$ , Five Below $Five Below (FIVE.US)$ and Walmart $Walmart (WMT.US)$ all seem set to beat comparable sales forecasts for the period, Truist Securities said Monday.

The firm raised price targets for several stocks in its retail coverage universe to "reflect broader market multiple expansion and the start of a rate cut cycle."

Truist raised its price target on Home Depot to $455 from $395 while reiterating a buy rating. Truist card data suggest that sales at the home improvement retailer are tracking 100 to 200 basis points above the brokerage's projection for a 3.5% decline in third-quarter US comparable sales.

Buy-rated Lowe's price target was lifted to $306 from $269, according to the research report. Its third-quarter sales are running 100 basis points above Truist's estimate for a 2.8% comparable sales decline.

Most "cyclical" names like Home Depot and Lowe's are expected to "run the furthest ahead of fundamentals (stocks will look expensive for some period of time), as the rate cut cycle begins," a group of analysts including Scot Ciccarelli wrote in the report.

Truist reiterated a buy rating and a $89 price target on Walmart and said third-quarter sales were likely 100 basis points ahead of its above-consensus estimate of 4% comparable sales growth. "Earlier in (the third quarter), sales were tracking roughly in-line with our forecasts, but have accelerated over the several weeks," the analysts said.

At Five Below, which Truist continues to rate as hold with an $87 price target, third-quarter sales started soft but "accelerated meaningfully" last month. The retailer is likely back on track to surpass recently lowered expectations, buoyed by a strong and early Halloween offering, the analysts said. Third-quarter sales at Five Below appear to be running 200 to 300 basis points ahead of Truist's model that called for a comparable sales decline of 5.5%.

Truist raised its price target on buy-rayed car parts retailer AutoZone (AZO) to $3,501 from $3,341. Truist additionally lifted its price targets on buy-rated O'Reilly Automotive (ORLY) to $1,290 from $1,204 and on buy-rated Tractor Supply (TSCO) to $325 from $293.