The Street Reacts To Walmart's Q3

Retailer Walmart Inc WMT reported third-quarter results Thursday highlighted by an earnings beat and the 16th consecutive quarter of rising comparable store sales. Here's what Street analysts are saying after the print.

The Analysts

Barclays' Karen Short maintains an Overweight rating on Walmart with an unchanged $110 price target.

Bank Of America Merrill Lynch's Robert Ohmes maintains at Buy, unchanged $115 price target.

Raymond James' Budd Bugatch maintains at Outperform, unchanged $105 price target.

KeyBanc Capital Markets' Edward Yruma maintains at Overweight, price target lifted from $107 to $112.

BMO Capital Markets' Kelly Bania maintains at Outperform, unchanged $110 price target.

Barclays: Ignore The 'Noise'

Walmart's Q3 shows some concerning "noise," but four highlights support a bullish stance on the stock, Short said in a note:

Core EBIT is stronger than it looks, as the company included the impact of hurricanes last year.

Gross margin declines are due to transportation cost pressures, as price investment and e-commerce pressure remains unchanged.

Grocery comps on a two-year stack are the highest seen in nine years.

E-commerce sales remain "robust."

Bank Of America: Solid Q3, Favorable Outlook

Walmart reported a "solid" Q3, and the momentum is sustainable heading into the holiday shopping season, Ohmes said in a note.

While Bentonville's full-year guidance does imply a deceleration in online sales in the fourth quarter, it's expected, as grocery store sales in Q4 typically accounts for a much smaller portion of online sales, the analyst said. 

Walmart's quarterly report solidifies the company's status of offering "better and best" options on thousands of brands online and offline with a growing focus on natural, organic and premium products, according to BofA. 

Raymond James: 'Sell On News' Drop

Thursday's price action in Walmart's stock could be viewed as a "buy on anticipation and sell on news" event, Bugatch said in a note. Walmart shares moved from $95 in October to around $104 ahead of the Q3 print, and some investors took the opportunity to cash in on profits, he said. 

Related Link: Cowen: Kohl's, Target, Tiffany Are Top Holiday Retail Picks

KeyBanc: Walmart A Winner In Holiday Season

The battle for retail supremacy during the holiday shopping season is typically "decided before it starts," Yruma said in a note. Encouragingly, Walmart's 3.4-percent comp growth in Q3 suggests that, at the very least, it is heading into the holiday season in a "strong position," the analyst said. 

The report marks the seventh quarter of U.S. store expense leverage, as the company generated efficiencies through integration of technology as a tool for the labor force, according to KeyBanc. 

BMO: Strength In Groceries

Walmart's grocery business continued to perform well in Q3 as comps grew at the high end of a low-single digit rate despite no price inflation, Bania said in a note.

The continued expansion of free Online Grocery Pickup should help sustain momentum moving forward as Walmart looks to include the service in 65 percent of stores in 2019 — up from 44 percent in 2018, the analyst said. 

Price Action

Walmart shares were down 1.52 percent at $98.07 at the time of publication Friday. 

Related Link: Walmart Trims 2019 Guidance, Moody's Analyst Calls Stock Undervalued

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