Street Calls of the Week
On Wednesday, RBC Capital Markets adjusted its outlook on Walmart Inc. (NYSE: NYSE:WMT), raising the retail giant's price target from $92.00 to $96.00 while maintaining an Outperform rating. The firm's revised analysis comes after Walmart's recent performance, which has demonstrated solid growth and a positive trajectory for the company's various revenue streams.
The analyst from RBC Capital Markets highlighted Walmart's ability to meet high expectations, noting the company's "flywheel" of growth is in motion. The firm anticipates a "long runway" for Walmart's alternative revenue and profit streams, including advertising, membership, and marketplace. These factors, coupled with an acceleration in general merchandise, are expected to drive margin expansion and increase Walmart's competitive pricing advantage over peers, potentially boosting market share.
RBC Capital updated its forecast for Walmart's fourth-quarter U.S. comparable sales, increasing the estimate to a 5% rise from the previously expected 4%. Additionally, the firm adjusted its projection for consolidated constant currency sales growth to 5.3% from 3.7%, and raised its adjusted earnings per share (EPS) estimate to $0.66 from $0.64.
Looking further ahead, RBC Capital provided its projections for the years 2025 and 2026. The firm now expects Walmart U.S. comparable sales to grow by 3.7% and 4.0% for 2025 and 2026, respectively, up from the earlier forecast of 3.5% for 2025. The estimates for consolidated constant currency sales growth were also revised to 5.5% for 2025 and 4.7% for 2026, from previous estimates of 4.3% and 5.0%. The new adjusted EPS forecasts stand at $2.83 for 2025 and $3.19 for 2026, an increase from the former predictions of $2.74 and $3.07.
The new price target of $96 reflects approximately 30 times the revised 2026 adjusted EPS estimate of $3.19, indicating RBC Capital's confidence in Walmart's continued financial performance and market position.
In other recent news, Walmart Inc. has been the focus of several optimistic analyst adjustments. Telsey Advisory Group, DA Davidson, and TD Cowen have all raised their price targets for Walmart to $100, maintaining their positive ratings. Truist Securities and UBS also increased their price targets to $98 and $100 respectively, with UBS highlighting Walmart's promising future and ongoing transformation.
Walmart's performance in the third quarter has been notable, with adjusted earnings per share (EPS) of $0.58 surpassing the consensus estimate of $0.53. U.S. comparable sales rose by 5.3%, significantly higher than the anticipated 3.6%. Additionally, Walmart's U.S. e-commerce sales experienced a robust 22% growth.
Analysts have praised Walmart's strategic initiatives, including its expansion into advertising, merchant solutions, and last-mile delivery. These areas have been identified as particularly promising due to their higher profitability compared to traditional retail operations. These are part of the recent developments that have been positively received by analysts.
Despite the positive outlook, analysts have also pointed out potential risks, such as Walmart's high price-to-earnings ratio and the need for consistent execution. However, investor sentiment for the fourth quarter remains optimistic, with expectations of a comparable sales-driven beat, bolstered by a strong holiday season, marketplace category expansion, and retention of market share through consistent execution.
InvestingPro Insights
Walmart's strong performance, as highlighted by RBC Capital Markets, is further supported by real-time data from InvestingPro. The retail giant's market capitalization stands at an impressive $696.11 billion, underlining its dominant position in the Consumer Staples Distribution & Retail industry. Walmart's revenue for the last twelve months reached $673.82 billion, with a solid revenue growth of 5.48%, aligning with RBC's positive outlook on the company's sales trajectory.
InvestingPro Tips reveal that Walmart has maintained dividend payments for 52 consecutive years and has raised its dividend for 29 consecutive years, demonstrating a strong commitment to shareholder returns. This consistency in dividend growth, coupled with a current dividend yield of 0.96%, adds to the company's appeal for income-focused investors.
The stock's performance has been particularly strong, with a 69.54% total return over the past year and a 35.32% return in the last six months. This aligns with RBC's bullish stance and increased price target. However, it's worth noting that Walmart is trading at a high P/E ratio of 34.74, which may indicate that the stock is priced for high growth expectations.
For investors seeking more comprehensive analysis, InvestingPro offers 17 additional tips for Walmart, providing a deeper understanding of the company's financial health and market position.
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