Walmart (WMT) is expected to post “solid” fiscal fourth-quarter results and gain further market share in the grocery, health and wellness, and e-commerce categories, UBS Securities said Monday.
The retail giant is scheduled to report fourth-quarter results Feb. 20. UBS raised its adjusted earnings outlook to $1.70 per share from $1.62 and expects revenue to grow 4.4% year over year to $171.28 billion. Wall Street is looking for adjusted EPS of $1.63 on revenue of $170.31 billion, according to the brokerage.
“We believe (Walmart) generated good momentum in (the fourth quarter) despite the topsy-turvy spending backdrop throughout the period,” UBS analysts Michael Lasser, Zeyn Burak and Mark Carden said in a note. The company’s latest quarterly results and guidance “should provide more optimism on the sustainability of its recent share gains and its future potential,” the analysts said.
UBS increased its US fourth-quarter same-store sales estimate to 3% from 2.5%. The company likely saw “relatively robust” consumer demand in the November and December period and continued to counter the impact of moderating inflation benefit with traffic and unit gains in the fourth quarter, the analysts said. “We believe its growth has come from sizable market share and wallet share gains across key categories.”
UBS pegs e-commerce sales growth at 20% for the quarter. Walmart has generated “impressive momentum” in that business, which will likely carry forward, the trio wrote. The company is expected to maintain a “bullish tone” regarding its various alternative businesses, with its WMT Connect ad business in the US poised for double-digit growth amid product and category expansion. Its international ad business is likely to benefit from timing shift of Big Billions Day sale event, according to the note.
UBS expects Walmart to “gain traction” with its high-margin revenue streams in 2024 and allow it to initially guide full-year EPS in a range of $6.80 to $7. The analysts said it will likely be difficult for the company to guide sales growth in line with its long-term algorithm of 4% without food inflation, with a 3%-to-4% outlook seen as the most likely scenario amid tough comparisons.
“Walmart’s compelling value should continue to resonate with consumers in 2024,” the analysts said. “The retailer can leverage its immense reach to capture market share as consumers continue to trade down to lower price points.” UBS kept its price target on the Walmart stock unchanged at $190, with a buy rating.
Overall, the brokerage said it sees “several macro uncertainties” weighing on retail in the year ahead. These include “the uncertain health of the US consumer, food disinflation, wavering demand for general merchandise, the distraction of the US elections, and the elevated interest-rate environment,” according to the note.