Walmart's Q4 Earnings Beat And Strategic VIZIO Buy Impresses Analyst, Says Shares Poised to Rise

Goldman Sachs analyst Kate McShane reiterated a Buy rating on Walmart Inc WMT with a price target of $180.

Walmart reported fourth-quarter adjusted EPS of $1.80, above McShane and Wall Street consensus estimates. 

Walmart U.S. same-store sales of +4.0% also tracked better than McShane and Wall Street estimates, driven by traffic (+4.3%) and partially offset by tickets (-0.3%) as per the analyst. 

By category, the grocery was up +mid-single-digit, noting market share gains in dollars and units and inflation of +low-single-digit. 

Health & wellness grew +mid teens, driven by higher script counts, mix shift toward branded from generic, strength in immunizations, and branded drug inflation, the analyst added. 

General merchandise declined -low-single-digit, driven by softness in home, seasonal, and toys due in part to deflation, while noting strength in automotive in addition to a sequential improvement for the segment overall, supported by unit growth in home, fashion, and hardlines, along with share gains from higher income households. 

Walmart also announced the acquisition of VIZIO Holding Corp VZIO and its operating system for $2.3 billion to support Walmart Connect’s growth (U.S. advertising).

Walmart initiated 2024 guidance with adjusted EPS of $6.70-7.12 (or $2.23-2.37 post-stock split) vs McShane and Wall Street estimates of $6.80 and $7.06, net sales growth of +3.0-4.0% against McShane and Wall Street estimates of +3.0% and +3.5%.

McShane expects the stock to track higher due to the solid fourth-quarter beat and fiscal 2024 guidance in-line to slightly better than expected. 

On the call, the analyst will seek details on quarter-to-date trends, the outlook for inflation, the promotional environment within grocery and general merchandise, the ramp of operating income dollar growth throughout the year and longer term, and details on the Vizio acquisition.

Price Action: WMT shares closed higher by 3.23% at $175.88 on Tuesday.

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