On Wednesday, Evercore ISI maintained its Outperform rating on Walmart Inc. (NYSE:WMT), with a steady price target of $182.00. The firm anticipates that Walmart will align with Wall Street's forecasts for the fourth quarter. However, it also foresees a potential near-term stock price decline of mid-single digits, attributing the expected dip to a possibly conservative outlook on consumer spending.
Walmart's stock has shown robust performance year-to-date, with a 7% increase, outpacing the Consumer Staples Select Sector SPDR Fund (XLP) which rose 1%, the Consumer Discretionary Select Sector SPDR Fund (XLY) which declined 2%, and the S&P 500's 4% gain. Evercore ISI projects Walmart will set its calendar year 2024 earnings guidance between $6.70 and $6.90, reflecting a 3-6% year-over-year growth. This estimate, however, is slightly below the consensus of $7.06, with Evercore ISI's own target at $7.00.
The firm also expects Walmart to guide for total revenue growth of 3-4% for the upcoming year. This projection is based on the assumption that inflation will remain between 0 to 1%, indicating a potential moderation in consumer demand compared to the previous year. Evercore ISI notes that significant investments, such as Walmart's recent increase in hourly wages to an average of $18 and improved store manager salaries, are likely to be a focus for the company as it aims to maintain flexibility for strategic initiatives.
Concerns about the near-term consumer environment were highlighted, considering factors such as the ongoing impact of reduced Supplemental Nutrition Assistance Program (SNAP) benefits, high housing costs, unpredictable tax refunds, and extreme weather conditions. The firm also pointed to the uncertainty associated with the election year and a shorter holiday season, which might limit the company's outlook.
Despite these concerns, Evercore ISI sees limited downside for Walmart's stock in the coming week. The firm concludes by reiterating Walmart's inclusion in its Fab Five Portfolio, citing positive traffic trends, potential for market share gains, and the possibility of margin expansion between 50-100 basis points over the next two to three years.
InvestingPro Insights
As Evercore ISI reiterates confidence in Walmart Inc. (NYSE:WMT) with an Outperform rating, InvestingPro data and tips provide further context to the retailer's financial health and market position. With a robust Market Cap of $451.92B and a P/E Ratio that stands at 27.72, Walmart showcases a significant presence in the market. Notably, the company has a PEG Ratio of 0.33 for the last twelve months as of Q3 2024, indicating a potentially favorable growth-adjusted valuation compared to peers.
InvestingPro Tips highlight that Walmart has raised its dividend for 28 consecutive years, showcasing a strong commitment to returning value to shareholders. This is further supported by the fact that Walmart has maintained dividend payments for 51 consecutive years. Additionally, 10 analysts have revised their earnings upwards for the upcoming period, suggesting a positive outlook on the company's profitability. These insights are particularly relevant given Evercore ISI's projections for Walmart's earnings and revenue growth, as well as their focus on the company's strategic investments and cost management.
Moreover, Walmart's Revenue Growth for the last twelve months as of Q3 2024 stood at 6.44%, a healthy signal of the company's ability to expand its operations in a challenging economic environment. This data point complements Evercore ISI's anticipation of total revenue growth of 3-4% for the upcoming year.
Interested readers can find additional InvestingPro Tips for Walmart, which could offer deeper insights into the company's financials and market trends. There are 10 more tips available, providing a comprehensive analysis for investors. For those considering an InvestingPro subscription, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. Visit https://www.investing.com/pro/WMT to explore these exclusive tips and data points.
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