Walmart Analysts Ahead Of 2Q: Likely For Upside Given Defensive Product Mix, Expansion Into Ad, Merchant Services and More

KeyBanc analyst Bradley B. Thomas reiterated an Overweight rating on Walmart Inc WMT with a price target of $175.00. Walmart will report 2Q23 earnings on August 17. 

Heading into retail earnings, the analyst remained positive on Overweight WMT, backed by encouraging signs within his proprietary credit and debit card spending data and geolocation traffic trends. 

Also Read: Walmart Positioned for Solid Earnings: Credit Suisse Analyst Boosts Estimates

Thomas sees positive trends at WMT in 2Q and believes the company can continue gaining market share in grocery as consumer spending remains tight.

Telsey Advisory Group analyst Joseph Feldman maintained an Outperform rating with a price target of $168.00.

The analyst maintained his solid 2Q23 and 2023 EPS estimates, reflecting the continued strong demand for groceries and essentials, gains from the trade-in of upper-income consumers, food inflation, and multiple initiatives, including digital and store resets. 

Partly offsetting the tailwinds are the general macro headwinds, pressuring discretionary categories, like electronics and home, and softness related to the cut in Supplemental Nutrition Assistance Program (SNAP) benefits. 

From a profitability standpoint, the lower supply chain costs and lapping of promotions and markdowns from last year should help, partly offset by the ongoing softness in higher margin discretionary products, LIFO charges, and elevated costs, such as labor. 

Overall, Walmart's defensive product mix should continue to generate positive traffic and solid performance - resulting in the company could raise its 2023 guidance. 

Feldman expects Walmart to remain a leader and market share gainer in the retail industry, given its defensive product mix, strong focus on the customer, ability to leverage talent and technology, and robust financial flexibility. 

Furthermore, he is happy to see Walmart expand its vision beyond retail and e-commerce, focusing on building a rich ecosystem, including advertising, merchant services, last-mile delivery (e.g., Spark), health services, and digital payments. 

These new ecosystem elements are more profitable than traditional retail and collectively should help strengthen Walmart's relationship with customers and generate good market share gains. 

Feldman forecasted inline 2Q23 EPS of $1.69 vs. the guidance of $1.63-$1.68. He projected total sales growth of 4.0% to ~$159 billion vs. the FactSet (FS) consensus of $159.4 billion.

He modeled total sales growth of 4.0% to $636 billion vs. FS up 4.2% to $637 billion and the guidance up 3.5%.

Price Action: WMT shares traded lower by 1.21% at $159.25 on the last check Monday.