Walmart Analyst Bullish Ahead Of Quarterly Report, Says Tariff Impact 'Seems Manageable'

Walmart Inc WMT is likely to show continued strength in multiple financial metrics when it reports second quarter earnings Thursday, Aug. 15, according to Baird.

The Analyst

Peter Benedict maintained an Outperform rating on Walmart with an unchanged $115 price target.

The Thesis

Walmart is expected to earn $1.22 per share in the second quarter on comps of 2.5-3%, Benedict said in a Monday note. (See his track record here.)

This would mark a deceleration from 3.4% comp growth in the first quarter, but remains "solid" and implies continued market share gains, the analyst said.

Bentonville appears to have benefited in the quarter from investments in price, continued rollout of grocery pickups and delivery and the launch of next-day delivery options, he said. 

The online business is expected to show 150 basis points of contribution to comps, as Walmart's e-commerce business likely grew at 35%, which is consistent with management's full-year expectations, Benedict said.

Sam's Club will likely show continued softer comps from last year's store closures, he said. 

Walmart's gross margins should show continued signs of pressure and could fall 35 basis points in the second quarter, the analyst said. The declines are mostly due to Flipkart investments and partially due to a modest decline in the U.S. business from investments in price, he said. 

Beyond the second quarter, Walmart looks to be on track to hit the Street's full-year 2019 EPS estimate of $4.84, and any impact to the P&L line from new tariffs "seems manageable," according to Baird.

Price Action

Walmart shares were down 2.03% at $105.10 at the time of publication Monday. 

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