On Monday, CFRA maintained its Buy rating on Walmart (NYSE:WMT), raising the price target from $72 to $75 ahead of the retail giant's fiscal Q2 earnings report scheduled for August 15. Analysts expect Walmart to exceed revenue and earnings expectations.
Comparable sales in the U.S., excluding fuel, are projected to rise by 3.5% year-over-year, with adjusted earnings per share (EPS) estimated at $0.68, beating consensus estimates of $0.65. Despite potential short-term consumer spending headwinds, CFRA remains optimistic about Walmart's long-term financial outlook.
This confidence stems from Walmart's ability to accelerate operating income growth relative to sales in the coming years. CFRA highlights strategies such as improving profitability in both first-party and third-party e-commerce, expanding private label offerings, and increasing higher-margin service flows, such as advertising and data monetization.
Furthermore, the implementation of automation in distribution and fulfillment centers, alongside enhanced sales of generic products through third-party market expansion, are seen as key growth drivers.
CFRA's price target adjustment reflects a multiple of 28 times its January EPS estimates for fiscal 2026, which have been revised upward to $2.68 from $2.65. Similarly, the EPS forecast for fiscal 2025 has been raised to $2.48 from $2.46, surpassing Walmart's five-year average price-to-earnings (P/E) ratio of 24 times.
In other recent news, Walmart is expected to report a 4% increase in quarterly revenue, marking the slowest growth rate in nearly two years. This comes as RBC Capital Markets analysts comment on the need for increased discounts to attract cautious consumers, especially in light of declining retail margins at Amazon and lower revenue forecasts.
Additionally, the U.S. Federal Trade Commission (FTC) is launching an investigation into persistently high grocery prices, involving major chains like Walmart, Costco, and Amazon's Whole Foods. Separately, Walmart Canada has invested $53 million to raise hourly wages for approximately 40,000 store employees, reflecting the company’s strategy to increase investments in its workforce.
Moreover, BMO Capital Markets raised its price target for Walmart from $75 to $80, citing the company's potential for valuation growth as it continues to demonstrate strong and reliable earnings. KeyBanc also increased its price target for Walmart to $82 from $75, maintaining an Overweight rating following recent investor meetings with Walmart's senior management.
As Walmart approaches its fiscal Q2 earnings, CFRA's Buy rating and increased price target to $75 underscore the retail giant's solid financial performance. InvestingPro data highlights Walmart's robust market capitalization of $555.08 billion, emphasizing its significant market presence.
Walmart's P/E ratio of 29.42 suggests a valuation aligned with short-term earnings growth, further amplified by a PEG ratio of 0.42, indicating potential undervaluation relative to its earnings growth trajectory. The company's impressive record of increasing dividends for 29 consecutive years signals its commitment to returning value to shareholders.
With a revenue growth of 5.68% over the past twelve months and an adjusted operating income of $27.61 billion, Walmart showcases strong financial resilience. The upcoming earnings report on August 15 will be a key event for investors monitoring the company's performance.