shares are lagging behind the broader market, but could make up ground through the back half of the year if a few pieces fall into place, one analyst argues—from strong earnings to robust back-to-school shopping to growing grocery sales
Bank of America
‘s Robert Ohmes delivered his upbeat assessment on Tuesday, a week before the discount giant reports fiscal second-quarter results before the opening bell on Aug. 18.
In afternoon trading, Walmart (ticker: WMT) stock was up 2.1% to $148.57. The shares have gained 2.2% year to date and are up 13.2% in the past 12 months.
Ohmes reiterated a Buy rating and $185 price target, and ran down his expectation for earnings—$1.55 a share in the quarter, a penny ahead of consensus estimates, on a 5% to 6% increase in comparable sales.
For the full year, Ohmes dialed up his numbers, citing stronger sales and margins, as well as robust renewals at warehouse arm Sam’s Club. He is now modeling earnings per-share of $6.25, up from $6.10, and ahead of the $5.95 average analyst estimate.
Yet, Ohmes argues, there are reasons beyond the results to own the stock. Ohmes is also optimistic about the outlook for the current third quarter, writing that Walmart could see a boost from back-to-school shopping, helped by the enhanced child tax credit.
In addition, his research shows Walmart is regaining market share in the grocery space. While supermarkets have tried to offset rising food costs with price increases, Walmart has largely held the line, sticking with a value focus. Online grocery sales have remained strong, too, and consumers are returning to higher-margin in-store categories like the deli and bakery.
Moreover, while e-commerce’s white hot gains have been decelerating lately, Ohmes argues there could be upside to his 25% online sales growth estimate for Walmart—it could outpace
(AMZN) following its slowdown in the June quarter.
Finally, he noted that investors now have more visibility on Walmart’s nonretail revenue streams, including advertising, recurring services fees, and especially healthcare. Although the company has long been expanding in healthcare, in the past year it has introduced prescription drug discounts and insurance services—for people and pets.
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