Walmart Reports Q2 EPS Beat, But No Upside Seen At Current Level

Wal-Mart Stores Inc WMT delivered both an earnings and sales beat in the second quarter while growing net e-commerce sales by 60 percent — yet, shares still managed to decline.

The world’s largest retailer posted solid 1.8-percent comp growth in the quarter; comp traffic was 1.3 percent. Despite solid results up against high expectations, shares failed to move higher, perhaps due to estimates staying relatively put.

“From here, the path for the shares will depend on the company’s ability to sustain its momentum & the slope of its earnings trajectory,” said UBS analyst Michael Lasser.

Walmart’s increased focus on e-commerce following last year’s Jet.com acquisition appears to be paying off, and the company continues to invest in e-commerce and technology.

“Importantly, physical stores leverage expense for the 2nd straight quarter. We expect modest margin contraction to continue for the balance of the year. It will be important to hear how long it can leverage in-store SG&A on an only slightly positive comp,” said Lasser.

UBS sees Walmart shares as fairly priced at these levels and maintains a Neutral rating on the company with a $84 price target.