Shares of Walmart Inc (NASDAQ:WMT) slid in early trading on Friday, after the company reported its second-quarter results.
Here are the key analyst takeaways:
- JPMorgan analyst Christopher Horvers reiterated an Overweight rating, while slashing the price target from $137 to $125.
- Guggenheim Securities analyst John Heinbockel maintained a Buy rating, while cutting the price target from $135 to $130.
- RBC Capital Markets analyst Steven Shemesh reiterated an Outperform rating, while trimming the price target from $137 to $131.
- DA Davidson analyst Michael Baker reaffirmed a Buy rating, while slashing the price target from $150 to $132.
- BTIG analyst Robert Drbul maintained a Buy rating, while reducing the price target from $145 to $140.
Check out other analyst stock ratings.
JPMorgan: Walmart US saw grocery growth in the mid-single digits versus the broader industry’s 1%-2% growth. The company posted total same-store sales growth of 3.4% ex health and wellness, he added.
The trend is likely to improve due to a later BTS (back-to-school) season, with the biggest weeks still to come. Price investments are likely to drive better volumes, Horvers noted.
"Ultimately, we believe the next iteration is for buyside estimates to move up, not down," Horvers further wrote.
Guggenheim Securities: Looking past the "tariff refund noise," Walmart’s second-quarter operating results were broadly in-line with expectations, Heinbockel said. The market’s "significantly adverse reaction to known headwinds" was surprising.
Total US sales growth moderated to 3.5%, with a slight slowdown likely in the next few quarters. Still, the company’s market share gains "remain healthy and profitable," Heinbockel added. While Walmart targets "the largest of TAMs" (total addressable markets), its temporarily slowing sales and the stock’s premium valuation "is a tough combo," he further wrote.
RBC Capital Markets: Walmart’s constant currency operating income excluding the IEEPA tariff refund grew around 9.8%, coming at the top end of the 7.0%-10% guidance range, Shemesh said. He added that this growth was driven by growth in:
- High-margin businesses such as membership
- Advertising
- Marketplace
The company used the tariff refund towards price investment, with around 11,000 rollbacks in the quarter, the analyst stated. The second-quarter Walmart US comps and management’s third-quarter guidance coming in softer than expected are "raising questions over duration of growth and the multiple," he further wrote.
DA Davidson: Walmart US comps of 2.6% missed consensus of 3.7% and represented a slowdown from the previous quarter’s 4.1%, Baker said. The slowdown was mainly due to incremental weakness among low-income consumers driven by higher gas prices, he added.
The company reported earnings of 81 cents per share, ahead of consensus of 74 cents per share; the upside was driven by profits from alternative business and tariff refunds, which will reverse next quarter, the analyst stated. The good news is that Walmart "aggressively" reinvested tariff refunds, which "should drive some 3Q comp improvement, but more importantly, increased share gains longer term," he further wrote.
BTIG: Walmart reported total sales of $186.1 billion, up 5.9% year-on-year, Drbul said. Walmart US comps increased 2.6%, "as comp growth was reduced by approximately 125 bps from Maximum Fair Price-related pharmacy deflation," he wrote.
Excluding Health & Wellness, US comps improved 3.4%, while core merchandise categories remained in the 3%-4% range, the analyst stated. Membership and other income grew 11.2%, driven by 17% growth in global membership fee revenue and continued strength in international membership programs, he added.
WMT Price Action: Shares of Walmart had declined by 0.90% to $102.66 at the time of publication on Friday.
Image: Shutterstock
Login to comment