Market Overview

Analysts React To Walmart's Q1 Earnings

Analysts React To Walmart's Q1 Earnings

Retail behemoth Walmart Inc (NYSE: WMT) reported first-quarter results highlighted by a big earnings beat, a 3.4 percent U.S. comp growth and 37 percent e-commerce growth.

Here is a summary of how some of the Street's top analysts reacted to the print.

The Analysts

Raymond James' Budd Bugatch maintains an Outperform rating on Walmart with an unchanged $110 price target.

KeyBanc Capital Markets' Edward Yruma maintains at Overweight, unchanged $120 price target.

Bank of America's Robert Ohmes maintains at Buy, unchanged $120 price target.

UBS' Michael Lasser maintains at Neutral, price target lifted from $105 to $107.

Walmart's stock traded around $101.26 per share at time of publication.

Raymond James: Encouraging Takeaways

Walmart reported a "solid start" to the new fiscal year and the company deserves credit for its recent performance and momentum, Bugatch wrote in a note. Investors should be "most encouraged" by the U.S. segment, which showed a 5.5 percent year-over-year increase in operating income to $4.1 billion. The business saw strength from a favorable sales mix while e-commerce margins came in better than management's own expectations.

KeyBanc: E-Commerce Is 'Powerful'

Walmart's earnings signals the e-commerce unit is a "powerful" business and it's on track to hit management's 35 percent growth target, Yruma wrote. The online business enjoyed higher-margin sales and is on a "solid path towards profitability" as management's heavy investments in logistics will reach maturation at more stores.

The company is on track to hit 3,100 pickup locations and 1,600 delivery locations by the end of 2019.

Walmart U.S. exceeded expectations and recorded its ninth straight quarter of store expense leverage. Sam's Club recorded a strong operating income gain due to the benefit from a reduction in tobacco sales and lapping costs related to closing several stores last year.

Related Link: Walmart's Q1: What To Like And Why Tariffs Aren't A Concern

BofA: Momentum Is Sustainable

Walmart saw sales momentum in the quarter from a mid-single-digit growth in grocery from a lack of food inflation while general merchandise showed a low-single-digit comp growth, Ohmes wrote. Meanwhile, Walmart's consumer surveys showed a sequential improvement from the fourth quarter, which suggests recent momentum can be sustained.

The e-commerce business's recent momentum is also sustainable and could benefit from expansion of online delivery, expansion of grocery pick-up and the planned roll-out of one-day delivery to 75 percent of the U.S. population.

UBS: Tough Compares Moving Forward

Walmart's momentum was evident in the quarter as the core U.S. two-year comp stack remained above 5 percent for the fourth consecutive quarter, Lasser wrote.

Walmart's same-store sales growth is likely to slow down a bit and deleveraging should re-accelerated, the analyst said. As such, the stock's valuation at 21 times next-12-months PE looks "appropriately valued" versus its three-year average of 18 times.

Latest Ratings for WMT

Jul 2020MKM PartnersInitiates Coverage OnNeutral
Jul 2020Morgan StanleyMaintainsOverweight
Jun 2020GuggenheimMaintainsBuy

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