Walmart Issues Profit Warning, But These 6 Analysts Remain Optimistic On The Retail Giant

Zinger Key Points
  • A Telsey Group analyst maintained an Outperform rating for Walmart and lowered the price target from $160 to $145.
  • A BMO Capital Markets analyst reiterated an Outperform rating, while reducing the price target from $165 to $160.

Walmart Inc WMT reduced its guidance for the current quarter and full year, citing rising prices for food and fuel. Here are the reactions of six top analysts.

RBC Capital Markets On Walmart

Analyst Steven Shemesh reiterated an Outperform rating, while reducing the price target from $153 to $135.

“It raised F2Q/FY’22 sales guidance, led by +DD food inflation, but lowered its profitability expectations as it seeks to wind down excess inventory levels and adjust mix more toward food/grocery,” Shemesh wrote in a note.

He lowered the earnings estimates for fiscal 2023 and 2024 from $6.40 per share to $5.64 per share and from $6.94 per share to $6.13 per share, respectively.

Stephens On Walmart

Analyst Ben Bienvenu held the rating unchanged at Overweight and the price target at $160.

“While the message has been clear that mix/inventory would pressure NT margins, and investors have been bracing for this, updated commentary shows the magnitude of this dynamic to be larger than WMT and investors expected,” Bienvenu said in a note.

Check out other analyst stock ratings.

Telsey Group On Walmart

Analyst Joseph Feldman maintained an Outperform rating for the company, while lowering the price target from $160 to $145.

Although the pressure on profitability due to a softer consumer spending environment was expected for the back half of 2022, “the magnitude of the decline at Walmart has been higher than anticipated,” partly on account of inventory issues, Feldman said in a note.

While Walmart’s profits may remain under pressure in the near term, its efforts to build “a powerful ecosystem, including advertising, merchant services, last-mile delivery, health services, and digital payments” will improve margins and “generate profitable market share gains” in the longer term, he added.

Morgan Stanley On Walmart

Analyst Pamela Kaufman said in a note that this was Walmart’s second downward earnings revision and it “reinforces our view that the packaged food companies are likely to see increasing retailer pushback to their plans for incremental pricing over the coming months, needed to offset elevated input cost inflation.”

BMO Capital Markets On Walmart

Analyst Kelly Bania reiterated an Outperform rating, while reducing the price target from $165 to $160. Despite the profit warning, she named Walmart as her top pick in the food retail sector.

Walmart’s pre-announcement shows pressure on margins due to “higher markdowns (notably in apparel) and greater-than-expected mix-shift,” despite higher-than-expected sales, Bania said in a note.

“Even with a clearly pressured consumer environment plagued by extremely high food inflation, too much discretionary inventory, and a still stressed supply chain, we continue to believe WMT remains well-positioned across the consumer landscape and believe margins can rebound from what will now be trough margins in 2022,” the analyst wrote.

Wells Fargo On Walmart

Analyst Edward Kelly maintained an Overweight rating, while reducing the price target from $150 to $130.

“WMT confirmed investor's biggest fear after the Q1 guide down; it didn't cut deep enough to reflect the risk associated with its excess inventory position and a slowing consumer,” Kelly said in a note.

While stating that he was “disappointed with the chain of events this year,” the analyst mentioned that Walmart still looks poised to gain market share with its value offering and “provides defense seemingly with minimal earnings risk at this point.”

WMT Price Action: Shares of Walmart had declined by 8.20% to $121.19 at the time of publication Tuesday.

Photo: Courtesy of Mike Mozart on flickr

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Posted In: Analyst ColorEarningsNewsPrice TargetReiterationAnalyst RatingsMoversTrading IdeasBen BienvenuBMO Capital MarketsEdward KellyJoseph FeldmanKelly BaniaMorgan StanleyPamela KaufmanRBC Capital MarketsStephensSteven ShemeshTelsey GroupWells Fargo