Petco Health & Wellness' (WOOF) Q2 results are poised to illustrate progress on the third phase of its return-to-growth initiatives, while the broader pet category remains under pressure, RBC Capital Markets said in a Monday research note.

Building on this, RBC said it believes that in-line results and reaffirmed fiscal 2026 guidance will further help management's credibility and should be viewed as "modest net positive" for the company's shares.

RBC expects Q2 comparable sales growth of 0.5%, net sales growth to be flat and adjusted EBITDA to fall 3% year-on-year to $111 million, compared with consensus of 0.7%, 0.3%, $111 million, respectively.

Additionally, for Q3, RBC expects comparable sales growth of 1.7% versus consensus of 1.6% and adjusted EBITDA of $104 million, an increase of 6%, in-line with consensus of $104 million.

RBC also expects management to maintain its fiscal 2026 guidance calling for comparable sales growth for the year.

RBC maintained its outperform rating with a $4 price target.

Price: 2.74, Change: -0.08, Percent Change: -2.84