Shares of the world’s largest retailer Walmart Inc. (WMT), have gained 12.5% in price over the past six months and 3.7% over the past month to close yesterday’s trading session at $147.78. Its shares are currently trading 3.8% below their $153.66 all-time high, which they hit on December 1, 2020.

The Bentonville, Ark.-based company’s impressive performance can be attributed primarily to its increased focus on its omnichannel strategy. However, WMT continues to face intense competition from companies such as Costco Wholesale Corporation (COST). Also, it is speculated that e-commerce giant Amazon.com, Inc. (AMZN) plans to open department store-style locations, which could increase competition for WMT.

Nevertheless, we think WMT is well-positioned to continue gaining in the near term relying on its solid fundamentals. Back-to-school shopping is expected to help increase the company’s sales in the near term. In addition, it announced a new collaboration with the Justice brand in July 2021, bringing its popular tween assortment to market just in time for back to school. Furthermore, WMT has taken several steps ahead of the holiday season, anticipating increasing demand. Last month, it launched a delivery service, Walmart GoLocal,  for other merchants throughout the United States. In addition, it announced on September 1 that it plans to hire 20,000 workers at its supply chain division ahead of the busy holiday season.

Click here to checkout our Retail Industry Report for 2021

Here’s what we think could influence WMT’s performance in the upcoming months:

Positive Developments

On July 28, WMT announced that it would offer several of its technologies and capabilities to other businesses to help accelerate digitalization. As part of the initiative, the company has partnered with Adobe Inc. (ADBE) to integrate its marketplace, online and in-store fulfillment, and pickup technologies with Adobe Commerce. In addition, WMT entered  a multi-year partnership with Ibotta in June 2021 to create and launch a new digital-offers program on Walmart.com and the Walmart app.

Also, WMT announced the first-ever private brand analog insulin launch on June 29, available exclusively through its private ReliOn brand. In the same month, WMT and Green Dot Corporation (GDOT) announced that the Walmart MoneyCard issued by GDOT is now offered as a demand deposit account, which is better equipped to help WMT’s customers save money.

Solid Financials

For its  fiscal second quarter, ended July 31, 2021, WMT’s total revenues increased 2.4% year-over-year to $141.05 billion, while its revenue from membership and other income came in at $1.18 billion, up 28.2% year-over-year. The company’s comparable sales grew 5.2% year-over-year. In addition, its net income was  $4.28 billion, representing a 56.6% sequential rise. Its EPS increased 56.7% sequentially to $1.52.

Favorable Analyst Estimates

Analysts expect WMT’s revenue to increase 2.7% year-over-year to $580.76 billion. The company’s EPS is expected to grow 15.1% this year and 4.8% next year. Its EPS is expected to grow at a rate of 8% per annum over the next five years. Wall Street analysts expect the stock to hit $172.48 in the near term, which indicates a potential 16.7% upside. Also, of the 22 analysts that have rated WMT, 18 rated it Buy.

POWR Ratings Show Promise

WMT has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. Out of these categories, WMT has an A grade for Sentiment, consistent with favorable analyst sentiment.

The stock has a B grade for Quality. This is justified because WMT’s trailing-12-month ROCE and ROTC of 12.90% and 12.49%, respectively, are higher than the 12.23% and 7.62%  industry averages.

WMT has a B grade for Value also, in sync with its forward EV/S and P/S of 0.82x and 0.74x, respectively, which are lower than the 2.03x and 1.46x industry averages.

Beyond what I have stated above, we have also given WMT grades for Stability, Growth, and Momentum. Get all the WMT ratings here.

WMT is ranked #10 out of 40 stocks in the A-rated Grocery/Big Box Retailers industry.

Bottom Line

WMT has significant dominance in the retail space, operating 10,500 stores and clubs under 48 banners across 24 countries and eCommerce websites. It reported impressive second-quarter earnings results and increased its guidance in anticipation of increasing sales. Compared to the low-single-digit growth it forecast previously, its U.S. same-store sales are expected to be up 5% - 6% in its fiscal year 2022. As a result, we think it could be wise to scoop up its shares now.

How Does Walmart (WMT) Stack Up Against its Peers?

WMT has an overall POWR Rating of B. However, one could also check out these other stocks within the Grocery/Big Box Retailers industry with an A (Strong Buy) rating: Target Corporation (TGT), Woolworths Holdings Limited (WLWHY), and Jerónimo Martins, SGPS, S.A. (JRONY).

Click here to checkout our Retail Industry Report for 2021

WMT shares were trading at $148.51 per share on Thursday morning, up $0.73 (+0.49%). Year-to-date, WMT has gained 4.24%, versus a 22.07% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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