On Wednesday, BofA Securities expressed continued confidence in Walmart Inc. (NYSE:WMT), maintaining a Buy rating and a $190.00 price target for the retail giant's shares. The firm's optimism is rooted in several growth drivers, including Walmart's digital advertising, the Walmart Plus membership program, and the rapid expansion of its third-party marketplace and fulfillment services. These elements are expected to contribute to sales growth outpacing cost increases over the next five years.
The investment firm highlights Walmart's strategic investments in employee wages, pricing, supply chain, automation, and sales mix initiatives as key factors that will likely enhance long-term profitability. Moreover, Walmart's efforts to achieve profitability in its first-party U.S. e-commerce segment by utilizing its stores to fulfill orders and activate local delivery networks, including through its Spark Driver program, were underscored as part of the company's broader strategy.
BofA Securities anticipates Walmart will announce its fourth-quarter fiscal year 2024 earnings on February 20, projecting an adjusted earnings per share (EPS) of $1.61 and a 2.0% increase in U.S. comparable sales. These figures are slightly below the consensus estimates compiled by Visible Alpha. The forecasted deceleration in growth compared to the third quarter's 4.9% rise is attributed to moderating grocery inflation and an expected continuation of softness in general merchandise sales.
Despite the anticipated slowdown, BofA Securities suggests there could be potential for positive surprises in Walmart's financial results. The basis for this expectation is the strong sales and transaction data observed for Walmart in the fourth quarter, as reported by Bloomberg Second Measure's analysis of credit and debit card transactions. This data hints at the possibility that Walmart's performance could exceed forecasts.
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