Walmart (WMT) is expected to report in-line Q2 earnings per share and US comparable sales despite a weak consumer/retail backdrop and moderating expectations for the company, Morgan Stanley said in an earnings preview Thursday.
The firm said it does not see any risk to Walmart’s valuation “even with an in-line quarter” as long as it keeps a consistent market share compared with peers and relative to Amazon.com (AMZN), and growth of its US earnings before interest and taxes exceeds sales growth driven by “fast-growing higher margin alternative revenue.”
Alternative profits, including digital media, 3P marketplace, and membership growth alongside supply chain savings, are expected to drive US margin expansion in Q2, according to the note.
International growth will fall behind Q1 due to fewer holiday contributions, the firm said.
“Given slow July retail data, the risks of a consumer slowdown rising and an upcoming election in [H2], we think retaining guidance should be acceptable with these uncertainties,” Morgan Stanley added.
Walmart is scheduled to report its Q2 financial results on Aug. 15.
Morgan Stanley reiterated its overweight rating on Walmart’s stock and kept the price target at $75.