Walmart Inc. (WMT) is the world’s biggest retail company, with trailing-12-month revenue of more than $600 billion. It engages in both the retail and wholesale business, marketing and selling an assortment of merchandise and services at stores and online at low prices worldwide.
For the third quarter of fiscal 2023, the company’s revenue grew 8.7% year-over-year globally, with strength in Walmart U.S., Sam’s Club U.S., Flipkart, and Walmex. An increase of 8.2% in Walmart comp sales (excluding fuel) and a 10% surge in its Sam’s Club comp sales helped to drive the growth.
Moreover, the discount chain’s e-commerce sales rose 16% year-over-year. Also, its nascent digital advertising is expanding rapidly, with global advertising business up over 30%, led by 40% at Walmart Connect in the U.S., and strength in Flipkart Ads. The company continued to gain market share in grocery, aided by unit growth in its food business.
WMT is increasingly attracting new business from higher-income customers looking for bargains amid a challenging macro environment. During a conference call with analysts, Walmart CFO John Rainey said, “We’ve continued to gain grocery market share from households across income demographics, with nearly three-quarters of the share gain coming from those exceeding $100,000 in annual income.”
Furthermore, WMT raised its full-year outlook to reflect its impressive third-quarter performance. The company now expects a net sales growth of 5.5%, up from the previous projection of 4.5%.
WMT has a record of increasing its dividend for 49 consecutive years. It pays a $2.24 per share dividend annually, which translates to a 1.59% yield on the current price. Its four-year average dividend yield is 1.68%. The company’s dividend payouts have grown at a 1.9% CAGR over the past three years.
The stock has gained 10.2% over the past month to close the last trading session at $140.68.
Here is what could influence WMT’s performance in the upcoming months:
Positive Recent Developments
On January 12, 2023, Walmart Commerce Technologies and Walmart GoLocal announced a partnership with Salesforce.com Inc. (CRM) to give retailers access to the tools and services that enable frictionless local pickup and delivery for customers globally.
On January 5, WMT announced that it had successfully operated 36 drone delivery hubs across seven states, including Arizona, Arkansas, Florida, North Carolina, Texas, Utah, and Virginia. Over the past year, Walmart has safely completed more than 6,000 deliveries to customers in as little as 30 minutes.
WMT is uniquely positioned to offer drone delivery at scale, with its 4,700 stores located within 90% of the U.S. population, which might benefit the company significantly.
Robust Financials
For the fiscal 2023 third quarter ended October 31, 2022, WMT’s revenue increased 8.8% year-over-year to $152.81 billion. Net sales from the Walmart U.S. segment grew 8.5% from the year-ago value to $104.80 billion, while net sales from Sam’s Club segment came in at $21.40 billion, up 12.6% year-over-year. Also, Walmart International's net sales were $25.30 billion, up 7.2% year-over-year.
As of October 31, 2022, the company’s current assets were $87.68 billion, an increase of 5.7% year-over-year.
Favorable Analyst Estimates
Analysts expect WMT’s revenue for the fiscal 2024 first quarter (ending April 2023) to come in at $145.63 billion, indicating an increase of 3.8% year-over-year. The consensus EPS estimate of $1.39 for the ongoing quarter indicates a 7% year-over-year increase. Also, the company has surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
Furthermore, the company’s revenue and EPS for the current fiscal year (ending January 2024) are expected to grow 3.1% and 7.5% from the previous year to $621.10 billion and $6.54, respectively.
POWR Ratings Show Promise
WMT's overall rating of A translates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. WMT has a Sentiment grade of B, in sync with favorable analyst estimates. Also, it has a B grade for Stability, consistent with a 24-month beta of 0.69.
WMT is ranked #8 out of 39 stocks in the Grocery/Big Box Retailers industry.
Beyond what I have stated above, we have also given WMT grades for Value, Growth, Momentum, and Quality. Get access to all WMT ratings here.
Bottom Line
Retail giant WMT continues to benefit from its growing online presence. With inflation still remaining high, shoppers are looking for bargains and are turning to this big-box retailer to buy groceries.
Given WMT’s solid top-line growth, bright growth prospects, and attractive dividends, it could be wise to invest in this top big-box retailer in 2023.
How Does Walmart Inc. (WMT) Stack up Against Its Peers?
WMT has an overall POWR Rating of A. One could also check out these other stocks within the Grocery/Big Box Retailers industry with an A (Strong Buy) rating: George Weston Ltd. (WNGRF) and Caseys General Stores, Inc. (CASY), and Ingles Markets Inc. CI A (IMKTA).
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WMT shares fell $0.34 (-0.24%) in premarket trading Tuesday. Year-to-date, WMT has declined -1.02%, versus a 7.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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