Most market watchers bullish on future Walmart financials

by Kim Souza ([email protected]) 829 views 

Walmart continues to draw Wall Street support, despite the slight earnings miss in the retailer’s fourth-quarter reported Tuesday (Feb. 17). Some analysts polled by Talk Business & Politics believe Walmart has the ability to outperform the market and they expect the retail giant to deliver through 2021.

Robert W. Baird analysts said Walmart has the ability to drive profitable growth while simultaneously investing in new technology/capabilities. Baird said Walmart has a strong omnichannel competitive positioning that should persist for the foreseeable future. Baird said Walmart’s efforts to expand the assortment of general merchandise items for same-day delivery should help build basket size and improve margin mix. Baird maintains its outperform rating with a share target price of $130.

Ben Bienvenu of Stephens Inc. said he continues to be impressed by management’s ability to execute on its strategy and balance cost controls and at the same time invest to drive market share growth. Stephens also reiterated its overweight rating with an aggressive price target of $135. (Stephens conducts investment banking services for Walmart and is compensated accordingly.)

Jefferies analyst Christopher Mandeville is also bullish on Walmart stock keeping a buy rating. Mandeville said Walmart’s early investments in e-commerce and technology as well as focus on low prices have positioned it well for future share gains. He also touted the retailer’s strategic investments in Flipkart, which he said opens access to the rapidly growing market in India. He believes it should yield a significant return in the future.

“E-commerce initiatives, including expanding marketplace and additional delivery options should drive continued robust e-commerce growth; we are encouraged by Walmart’s testing of micro-fulfillment,” Mandeville said.

Chuck Glom, an analyst with Gordon Haskett Research, remains a buyer of Walmart following the lackluster earnings report. He said Walmart U.S. is set up to drive strong operating income and the aggressive stock buybacks between $7 billion to $8 billion should help drive fiscal year earnings above $5 per share. Glom reduced this year’s earnings expectation to range between $5.15 and $5.40 but maintained his price target at $130.

Cowen & Co. likes Walmart for future growth, but analyst Oliver Chen took pause with the retail giant’s plans to use collected consumer data to create more personal shopping experiences. Walmart CEO Doug McMillon said Tuesday the company will dive into this area in efforts to enhance and shopping experiences and drive loyalty. Cowen warns against running afoul of customer privacy standards.

“In our view, retail is quickly moving beyond the connected store into the connected data set, we expect younger generations to demand transparency across both data and supply chains,” Chen, said.

Cowen analysts maintain their outperform stock rating for Walmart shares and a $140 price target.

UBS analyst Michael Lasser said Walmart was not immune from some near-term pressures that impacted other retailers like Target. UBS rates Walmart stock neutral with a $125 price target.

“Still its early guidance leads us to believe that its current year-to-date performance in February has been strong and it’s well positioned to take further share,” Lasser notes.

Walmart also said Tuesday it increased its annual dividend for shareholders 1.9% to $2.16 to be paid in four quarterly installments of 54-cents per share. This gives Walmart a dividend yield of 1.83% and it marks the 47th consecutive year Walmart has increased its annual dividend.

Walmart shares closed Wednesday (Feb. 18) at $117.68, down $1.95 on the day.

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