Walmart Stock To Trade Higher Post Q4?

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WMT
Walmart

Walmart (NYSE: WMT), the world’s largest retailer, operating discount stores, supercenters, neighborhood markets, and Sam’s Club warehouses, is scheduled to report its fiscal fourth-quarter results on Thursday, February 17. We expect WMT stock to trade higher on a likely revenue and earnings beat, driven by growth across all reporting segments – Walmart U.S, Walmart International, and Sam’s Club. The big-box retailer has benefited from its low prices and improving digital presence in the first three-quarters of the FY’22 (year ended Jan 2022) – all this while leveraging its vast network of brick-and-mortar stores. Walmart’s U.S. comparable-store sales growth grew to 9% in Q3 after taking a hit to 5% in Q2 and Q1. The retailer is seeing no sign of a demand slowdown as consumers are still eagerly spending in attractive categories like home furnishings. We expect this trend to continue into Q4, as well. Looking ahead, Walmart sees FY’22 U.S. comparable sales growth above 6% and FY22 EPS of about $6.40 vs. a $6.20 to $6.35 prior range.

Our forecast indicates that Walmart’s valuation is $147 per share, which is 9% higher than the current market price. Look at our interactive dashboard analysis on WMT’s Earnings Preview: What To Expect in Q4? for more details.

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(1) Revenues expected to be slightly ahead of consensus estimates

Trefis estimates Walmart’s Q4 2022 revenues to be around $153.2 Bil, slightly ahead of the consensus estimate. In Q3, WMT’s revenue was up 4.3% year-over-year (y-o-y) to $140.5 billion and comparable sales in the U.S. were up 9.9%. To break it down further, transactions were 5.7% higher in the U.S. and the average ticket was 3.3% higher. The retail giant’s U.S. e-commerce sales rose 8% y-o-y in the quarter and were 87% higher than the same quarter two years ago.

For the full year, the big-box retailer plans to spend a total of $14 billion to build a stronger infrastructure in order to support its elevated sales volumes, particularly in the online business. These also include spending on its supply chain, automation, and wages. We now forecast Walmart’s revenues to be $573 billion for fiscal 2022 (year ended Jan 2022), up 2.4% y-o-y.

2) EPS likely to be marginally ahead of consensus estimates

WMT’s Q4 2022 earnings per share (EPS) is expected to be $1.54 per Trefis analysis, marginally above the consensus estimate of $1.50. The retailer’s EPS declined 34% y-o-y to $3.61 in the first nine months of FY’22. It is worth mentioning that online services that have gained steam, such as curbside pickup, require additional labor – translating to higher labor costs. And, Walmart has not been passing these costs on to its customers, even as more take advantage of the convenience of shopping online. So, these costs are expected to pressure the company’s bottom line in the upcoming Q4, as well.

(3) Stock price estimate higher than the current market price

Going by our Walmart Valuation, with an EPS estimate of around $6.45 and P/E multiple of 22.8x in fiscal 2022, this translates into a price of $147, which is 9% higher than the current market price.

It is helpful to see how its peers stack up. WMT Peers shows how Walmart compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end 2016.

Returns Feb 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 WMT Return -4% -8% 93%
 S&P 500 Return -2% -7% 97%
 Trefis MS Portfolio Return 1% -9% 258%

[1] Month-to-date and year-to-date as of 2/15/2022
[2] Cumulative total returns since the end of 2016

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