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On Friday, RBC Capital updated its financial outlook for Walmart Inc. (NYSE:WMT), increasing the retail giant's price target to $80.00 from the previous $74.00, while maintaining an Outperform rating. This adjustment reflects the firm's positive view on Walmart's recent performance and future earnings potential.
Walmart has demonstrated notable top-line growth, which RBC Capital attributes to market share gains rather than overall U.S. consumer stability. The retailer's operating income growth was robust at 8.8% on a constant currency basis, bolstered by a significant 26% increase in global advertising revenue. RBC Capital sees Walmart as a defensive play in an uncertain economic environment, with substantial long-term earnings per share (EPS) potential.
The firm has revised its forecasts for Walmart's U.S. comparable sales growth to 3.9% for fiscal year 2025 and 3.5% for fiscal year 2026, up from the previously projected 3.5% for both years. Additionally, RBC Capital has adjusted its estimates for consolidated constant currency net sales growth to 4.7% for FY'25 and 4.3% for FY'26, which is a slight increase from its prior estimates of 4.3% and 4.4%, respectively.
In terms of earnings, the adjusted EPS estimates for Walmart have been increased to $2.44 for FY'25 and $2.75 for FY'26, up from the previous $2.40 and $2.70 estimates. The new price target of $80 is based on approximately 29 times the firm's revised FY'26 EPS estimate of $2.76.
Despite the price-to-earnings multiple being higher than Walmart's historical average, RBC Capital believes the premium is warranted given the duration of Walmart's earnings potential. The firm also notes that a separate discounted cash flow (DCF) valuation supports the revised price target.
In other recent news, Walmart Inc. has reported robust growth in the second quarter of fiscal year 2025. The company's strong performance was driven by its international and e-commerce segments, with e-commerce sales seeing a significant uptick.
Walmart's CEO, Doug McMillon, and CFO, John David Rainey, emphasized the company's commitment to providing value and leveraging technology to improve customer experience. The company has also raised its full-year guidance for sales and operating income growth.
Additionally, the company announced the addition of Bob Moritz to its board of directors.
These recent developments reflect Walmart's ongoing efforts to invest in AI, automation, and technology to enhance customer experience and supply chain efficiency. The company's advertising, membership, marketplace, and data analytics businesses are also expanding. However, Walmart remains cautious about the economic and geopolitical climate.
InvestingPro Insights
As Walmart Inc. (NYSE:WMT) garners attention with its revised price target from RBC Capital, investors seeking a deeper dive into the company's financial health can find valuable insights from InvestingPro. A noteworthy InvestingPro Tip is that Walmart has raised its dividend for 29 consecutive years, reflecting a commitment to shareholder returns. This is further supported by the company's dividend growth over the last twelve months, which stands at a healthy 9.21%. Additionally, Walmart's significant return over the last week, with a 1 Week Price Total Return of 7.7%, indicates strong recent market performance.
From a valuation perspective, Walmart's P/E Ratio is currently at 35.78, suggesting a premium compared to near-term earnings growth. This aligns with RBC Capital's observation of a higher than average price-to-earnings multiple. Furthermore, the company's Price / Book ratio as of the last twelve months is 6.97, which could be seen as high, indicating that the stock may be trading at a premium relative to its book value.
For investors interested in exploring more about Walmart's financials and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/WMT. These tips delve into areas such as analyst earnings revisions, stock trading territory, and the company's performance within its industry, offering a comprehensive view that can inform investment decisions.
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