Should You Buy Walmart Stock? – Trefis
[Updated: 12/31/21] WMT Inventory Update
Walmart (NYSE: WMT) released its third quarter report, in which revenue and profits were slightly higher than Trefis’ estimates. The company exceeded market expectations for earnings and earnings in the third quarter with reported revenue of $ 140.5 billion, up 4.3% year-over-year (year-over-year) , and constant currency operating income increased 6.3% year-over-year, which led to adjusted EPS of $ 1.45. Despite supply chain issues, the world’s largest company by revenue posted 9.2% same-store sales growth in the United States, up 15.6% on a two-year basis. That said, sales at Sam’s Club were even stronger, with line-ups surging 25% on a two-year basis. In addition, the company’s U.S. e-commerce sales grew 8% in the quarter and 87% from the same quarter two years ago. However, consolidated operating expenses as a percentage of sales decreased by 4 basis points as strong sales growth and lower expenses related to Covid-19 were offset by investments in wages.
But if we were to look at financial results for the first nine months of fiscal 2022, the retail giant’s revenue rose 3% to $ 416 billion from the same period of fiscal 2021. However, net profit fell 35% year-on-year to just over $ 10 billion during this period. period. A loss on the sale of Walmart Argentina weighed on results. Overall, the results reflect a slowdown from fiscal 2021, when revenues increased 7% and net profit, driven by soaring costs and rising income taxes, decreased by 10%. %. That said, Walmart still seems well positioned for the holidays with current inventories up more than 11%.
For the full year 2022, Walmart forecast a 6% gain in same-store sales and also raised its adjusted profit guidance. He is now forecasting EPS of $ 6.40, up from earlier forecast of $ 6.20 to $ 6.35. We updated our model after the release of Q3. We are now planning Walmart Revenue to $ 572.6 billion for the full year 2022, up 2% year-on-year. Looking at the result, we are now forecasting EPS at $ 6.45. In view of the evolution of our revenue and profit forecasts, we have revised our Walmart Rating at $ 147 per share, based on expected EPS of $ 6.45 and a P / E multiple of 22.8x for fiscal 2022, almost 3% more than the current market price . We believe the company’s shares are valued appropriately at current levels.
Walmart’s stock price is down slightly since the start of the year. Investors appeared concerned that people would turn away from Walmart once fear of the pandemic subsides. Customers drastically changed their spending habits during the pandemic, and it’s unclear whether those habits will continue in the post-pandemic world.
Below is our previous coverage of Walmart stocks where you can follow our view over time.
[Updated: 11/12/21] WMT Q3 pre-winnings
Walmart (NYSE: WMT), the world’s largest retailer, operating discount stores, supercentres, neighborhood markets and Sam’s Club warehouses, is expected to release its third quarter tax results on Tuesday, November 16. through growth in all reporting segments – Walmart US, Walmart International and Sam’s Club. The big box retailer took advantage of its low prices and improved digital presence in the first half of fiscal year, while leveraging its extensive network of physical stores. As the sales gain slowed as same-store sales growth reached 5% in the second quarter, down from 6% in the first quarter and a 9% increase in the prior year, mixes were still higher. to the 3% growth the company experienced two years ago in the pre-pandemic quarter of Q2. Going forward, Walmart expects third-quarter comparable sales in the United States to be between 6% and 7%, excluding fuel. He also expects earnings per share (EPS) of between $ 1.30 and $ 1.40, against a consensus of $ 1.31. For the full year, Walmart is now seeing comps increase between 5% and 6% in the United States, with operating profit increasing between 9% and 11.5%. The multi-line retailer now expects slightly positive sales growth this year, even after climbing 8% last year. Our forecast indicates that Walmart’s valuation is $ 160 per share, which is 8% more than the current market price. Check out our interactive dashboard analysis on WMT’s pre-wins: What to expect in the third trimester? for more details.
(1) Revenue expected in line with consensus estimates
Trefis estimates Walmart’s revenue in Q3 2022 to be around $ 136 Bil, almost in line with the consensus estimate of $ 135.5 billion. The company’s revenue grew 2% year-over-year (year-over-year), with comparable sales in the United States up 5.2% in the quarter (which also shattered the consensus estimate of 3.1% comps). In fact, Walmart sees no signs of slowing demand, as consumers are still eagerly spending in compelling categories like home furnishings – despite some stimulus rollbacks. We expect this trend to continue in the third quarter as well.
For the year as a whole, the big box retailer plans to spend $ 14 billion to build a stronger infrastructure to support its high sales volumes, especially in e-commerce. These also include spending on its supply chain, automation, and salaries.
2) EPS should be slightly higher than consensus estimates
WMT’s earnings per share (EPS) for the third quarter of 2022 is expected to be $ 1.42 per Trefis analysis, slightly above the consensus estimate of $ 1.40. The retailer’s EPS fell 32% year-on-year to $ 2.48 in the fiscal first half of the year. It should be mentioned that online services that have gained momentum, such as curbside pickup, require additional manpower, resulting in higher labor costs. . And, Walmart hasn’t passed those costs on to its customers, even though more are enjoying the convenience of shopping online. Thus, these costs are also expected to put pressure on the company’s results in the next quarter.
We are now planning Walmart revenue to $ 566 billion in fiscal 2022 (year ending January 2022), up slightly year-over-year. Looking at the result, we are now forecasting EPS at $ 6.31.
(3) Estimate of the share price higher than the current market price
Through our Walmart Rating, with an EPS estimate of around $ 6.31 and a P / E multiple of 25.3x in fiscal 2022, that translates to a price of $ 160, which is 8% more than the current price. of the market.
For a more in-depth comparison between peer groups, it’s helpful to see how they rank. Comparing Walmart Stocks to Peers shows how WMT stacks up against its peers on the metrics that matter.
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|Return of the S&P 500||3%||27%||114%|
|Trefis MS Portfolio Return||2%||47%||296%|
 Monthly cumulative and annual cumulative at 12/30/2021
 Total cumulative returns since 2017