Gold prices just lower; monthly gains on track
On Friday, JPMorgan analyst Joseph Giordano adjusted the firm's stance on Wal-Mart de Mexico SAB de CV (OTC:WMMVF) (WALMEX:MM) (OTC: WMMVY), downgrading the stock from Overweight to Neutral. The price target was also revised from Peso65.00 to Peso62.00. Despite the downgrade, InvestingPro data shows Walmex maintains strong fundamentals with a 'GOOD' overall financial health score and has consistently paid dividends for 20 consecutive years. This decision follows the recent publication of a report by JPMorgan earlier in the week, which had initially suggested that the negatives for Walmex were already factored into its pricing, indicating a potentially favorable entry point for investors.
However, the release of Walmex's fourth-quarter 2024 results prompted a reassessment. The company's adjusted earnings per share (EPS) increased by 3% year-over-year to Ps0.88, falling short of JPMorgan's estimates by 1% and 6% below the consensus. According to InvestingPro analysis, the company maintains healthy profitability metrics with a 24.1% gross profit margin and an 11.6% return on assets over the last twelve months. The results brought to light several concerns, including flat year-over-year traffic in Mexico despite margin investments, unexpected expense pressures impacting EBITDA, and a deterioration in working capital due to higher inventory levels.
These factors have led to a projection of weaker performance for Walmex in 2025, as confirmed by the company's management, which forecasts year-over-year top-line growth of 6-7%, a 2 percentage point decrease from JPMorgan's previous expectations at the higher end. Consequently, JPMorgan has reduced its EPS estimates for 2025 and 2026 by 8% and 7%, respectively, anticipating modest growth of 4% and 9% year-over-year for these periods. These revised figures are approximately 5% below the consensus.
The new price target of Peso62.00 reflects an 8% upside from the current price levels, suggesting limited growth potential according to JPMorgan's analysis. This adjustment in both rating and price target reflects the latest financial data and the challenges Walmex is expected to face in the near term. While the stock has experienced a 28.6% decline over the past year, InvestingPro subscribers can access additional insights, including 6 more exclusive ProTips and comprehensive valuation metrics to make informed investment decisions.
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