Walmart Inc (NYSE:WMT) shares were in the clearance aisle Wednesday after the company reported rising costs related to supply chain problems and inflation in the first quarter.
On Tuesday, Walmart reported adjusted first-quarter EPS of $1.30, missing consensus analyst estimates of $1.48. Quarterly revenue of $141.6 billion, beating Wall Street expectations of $138.8 billion. Revenue was up 2.4% from a year ago.
Walmart reported U.S. same-store sales growth of 3% year-over-year and 9% on a two-year basis.
Looking ahead, Walmart raised its full-year sales growth estimate from 3% to 4% on a constant-currency basis. Yet Walmart cut its full-year EPS growth estimate from a mid-single-digit increase to a 1% decrease.
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Concerning Costs: BMO Capital Markets analyst Kelly Bania said Walmart's investments in recent years position the company well for consistent earnings growth in the long-term.
"While Q1 was disappointing, we continue to see WMT's share price as highly attractive for a global retailer with difficult-to-replicate scale and strong price positioning, and Walmart remains our top pick," Bania wrote.
RBC Capital Markets analyst Steven Shemesh said Walmart's sales numbers were solid, but commentary on rising costs was somewhat concerning.
"While 1Q results and the FY'23 EPS guide down were disappointing, we believe WMT is one of the 'safest' plays in an uncertain macro environment," Shemesh wrote.
Telsey Advisory Group analyst Joseph Feldman said cost pressures clearly weighed on Walmart's 2022 earnings guidance.
"We are encouraged to see Walmart expand its vision beyond retail and e-commerce, with a focus on building a powerful ecosystem, including advertising, merchant services, last-mile delivery, health services, and digital payments," Feldman wrote.
Buying Opportunity: Raymond James analyst Bobby Griffin said Walmart's topline momentum remains strong, and the stock's price weakness on Wednesday is somewhat surprising.
"All in, we are buyers on the pullback, and believe WMT’s defensible attributes alongside best-in-class omni-channel capabilities, financial strength and leadership leave it positioned well for better performance in the coming quarters," Griffin wrote.
Bank of America analyst Robert Ohmes said the pullback in Walmart shares creates a "particularly attractive buying opportunity" for long-term investors.
"We see further support for valuation upside from rising visibility on alternative profit stream opps., incl. Digital advertising & WMT Luminate (new data monetization business that grew 75%+ in F1Q)," Ohmes wrote.
Walmart Ratings, Price Targets:
- Raymond James has an Outperform rating and cut the price target from $165 to $150.
- BMO Capital Markets has an Outperform rating and lowered the price target from $170 to $165.
- RBC Capital Markets has an Outperform rating and cut the price target from $160 to $153.
- Telsey Advisory Group has an Outperform rating and lowered the price target from $175 to $160.
- Bank of America has a Buy rating and lowered the price objective from $190 to $160.
Photo courtesy of Walmart.
