Retail giant Walmart Inc. (WMT) operates through three segments: Walmart U.S., Walmart International, and Sam's Club. It reported a solid first-quarter performance and anticipates a multi-year growth outlook given its growth investments and productivity advancement initiatives.

WMT’s president and CEO, Doug McMillon, stated, “We had a strong quarter. Comp sales were strong globally with eCommerce up 26%. We leveraged expenses, expanded operating margin, and grew profit ahead of sales.”

Amid rapid advancements in technology to enhance production and efficiency, automation, and state-of-the-art technology, the company aims to provide a more consistent, predictable, and higher-quality delivery service to stores and customers and react more quickly to customer demand.

The company is strengthening its global omnichannel ecosystem and scaling higher-margin value streams in terms of advertising, data, memberships, and marketplace, which should help deliver a better customer and member experience while driving stronger returns.

WMT raised its second-quarter outlook to reflect its commendable first-quarter performance. The company now expects a consolidated net sales increase of approximately 4% and an adjusted EPS of $1.68, up 3.1% from the previously estimated figure of $1.63.

WMT’s stock has gained 19.3% over the past year to close its last trading session at $157.48. Wall Street analysts expect the stock to hit $169.44 in the near term, indicating a potential upside of 7.6%. It has an average trading volume of 5.69 million, indicating substantial interest in the stock. 

Here are some factors that could influence WMT’s performance in the upcoming months

Robust Financials 

WMT’s total revenue for the fiscal first quarter (ended April 30, 2023) increased 7.6% year-over-year to $152.30 billion. The company’s adjusted operating income increased 17.3% year-over-year to $6.24 billion. Moreover, its adjusted EPS came in at $1.47, representing a 13.1% increase over the prior-year quarter.

Solid Historical Growth

WMT’s levered FCF grew at a CAGR of 8% over the past three years. Its EBIT grew at a CAGR of 5.4% over the past three years. Moreover, its revenue grew at a CAGR of 5.2% over the same time period.

High Profitability 

In terms of the trailing-12-month asset turnover ratio, WMT’s 2.53x is 186.6% higher than the 0.88x industry average. Its 10.61% trailing-12-month Return on Total Capital is 68.6% higher than the 6.29% industry average. Likewise, its 15.14% trailing-12-month Return on Common Equity is 48.8% higher than the industry average of 10.17%.

Favorable Analyst Estimates 

The consensus revenue estimate of $634.45 billion for fiscal 2024 indicates a 4.7% increase from the prior year. Its EPS for fiscal 2025 is expected to increase 10.7% year-over-year to $6.90, while its revenue is expected to increase 3.7% year-over-year to $658.10 billion.  

Additionally, WMT’s revenue estimate for the quarter ending July 31, 2023, is expected to increase 4.8% year-over-year to $158.57 billion. It surpassed the consensus EPS estimates and revenue estimates in each of the trailing four quarters.  

POWR Ratings Show Promise 

It’s no surprise that WMT has an overall A rating, equating to a Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.  

Our proprietary rating system also evaluates each stock based on eight distinct categories.  

The stock has an A grade for Stability, in sync with its beta of 0.50. It also has a B for Sentiment and Quality, consistent with its favorable analyst estimates and high profitability. 

Within the A-rated Grocery/Big Box Retailers industry, WMT is ranked #7 of 38 stocks.    

Click here to access the additional ratings of WMT for Growth, Value, and Momentum.

Bottom Line    

With a raised outlook after a strong first-quarter performance and the company’s efforts to enhance consumer experiences, investors could look to consider WMT. Given the company’s robust financial growth, high profitability, and favorable analyst estimates, the stock could be worth buying now.

How Does Walmart Inc. (WMT) Stack Up Against Its Peers?     

While WMT has an overall POWR Ratings grade of A, equating to a Strong Buy rating, one may also want to consider these other stocks within the Grocery/Big Box Retailers industry with an A (Strong Buy) or B (Buy) rating: Village Super Market, Inc. (VLGEA), Koninklijke Ahold Delhaize N.V. (ADRNY), and George Weston Ltd. (WNGRF).  

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WMT shares were trading at $158.60 per share on Friday afternoon, up $1.12 (+0.71%). Year-to-date, WMT has gained 12.74%, versus a 19.51% rise in the benchmark S&P 500 index during the same period.

Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.

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