Walmart (WMT) had a lot to say this week and investors were all ears.
The retail giant saw its shares zoom to a fresh record high on Feb. 20 after posting stronger-than-expected fourth-quarter earnings, issuing a big boost to its annual dividend, and unveiling a $2.3 billion takeover of smart-TV maker Vizio.
"We’re proud of the team and excited about building on our momentum as we work to bring prices down for our customers and members," Doug McMillion, president and CEO, said in a statement.
Walmart said that adjusted earnings for the three months ending in January came in at $1.80 a share, up 5.3% from the year-earlier period and firmly ahead of the Wall Street consensus forecast of $1.65.
Revenue climbed 5.7% from a year earlier to $173.4 billion, again topping analysts' estimates of a $170.71 billion tally. U.S. same-store sales were up 4%, firmly ahead of Wall Street's 3.2% forecast.
E-commerce growing
CEO Doug McMillion told analysts that the agreement to buy Vizio "gives us the opportunity to reach and serve customers in new ways and connect more dots for those that advertise with us."
Looking into the next fiscal year, Walmart forecast earnings in the region of $6.70 to $7.12 per share, with net sales rising between 3% and 4%.
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Analysts surveyed by FactSet expected the company to report full-year earnings of $7.06 per share on $671.5 billion in revenue.
Walmart's global eCommerce sales grew 23%, passing $100 billion for the first time. In the U.S., e-commerce rose 17% as shoppers used curbside pickup and got orders delivered to their homes.
"One of the areas I'm most pleased about is the improvement in e-commerce profitability within the Walmart U.S. segment, resulting from lower e-commerce fulfillment costs and densifying the last mile," said Chief Financial Officer John David Rainey, referring to the delivery as the last leg of transportation.
"Our store proximity to customers is an advantage," he added.
Real Money columnist Stephen Guilfoyle noted that “Walmart is constantly evolving in order to remain competitive.”
“Maybe it does not take a whole lot of share from Amazon just yet, but the eCommerce business is still growing and a bit faster than Amazon's online retail business," he said.
Guilfoyle said that although he likes Walmart, “the balance sheet needs to show more discipline, and I have felt that way for some time, hence my lack of investment in the name, though I was once well known as a Walmart bull.”
Walmart taking market share
Several analysts adjusted their price targets after Walmart released its results.
Morgan Stanley analyst Simeon Gutman raised the firm's price target on Walmart to $200 from $168 while keeping an overweight rating on the shares.
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The company's wider-than-normal guidance reflects additional conservatism following the third quarter miss, said Gutman, who thinks the fiscal year 2025 range should provide a cushion throughout the year.
The analyst said gross margin upside is likely if general merchandise accelerates.
"Our general merchandise prices are lower than a year ago and even two years ago in some categories, which means our customers are finding value in areas like apparel and hard lines," McMillion said.
Rainey told analysts, "For general merchandise categories that surged during 2020 and '21 and have longer replacement cycles, such as electronics and housewares, we expect relative weakness to persist in FY '25."
Rainey added that Walmart is "hopeful to see directional improvement in the second half as comparisons ease.”
Piper Sandler raised the firm's price target on Walmart to $228 from $210 and kept an overweight rating on the shares.
The firm noted that Walmart posted a very strong fourth quarter, but Piper thinks it is commentary on the non-retail P&L and share gains that leave it most bullish.
Piper said Walmart told analysts that advertising membership income will be 20% of fiscal year 2025 EBIT.
Marketplace momentum continues to accelerate, and Walmart is using both value and convenience to take market share, the firm said.
Walmart remains one of Piper's favorite ideas in its coverage.
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