While the focus during the earnings season has previously been in the technology sector it has now moved to the retail industry with particular attention directed at Walmart. Across the board analysts are expecting the earnings per share and revenues of the retail behemoth to go up.
Consequently analysts at Susquehana Financial Group have assigned a positive rating to the stock of Walmart and this is largely due to its dominant position in the food retail subsector. The price target of Walmart has as a result been raised from $115 to $126 by Susquehana on the premise that the giant retailer possesses a defensive moat with regards to food. Additionally, according to Susquehana, Walmart’s last-mile delivery solution is viable.
No. 2 online retailer
In a report Susquehana notes that with regards to e-commerce in the United States Walmart is No. 2 after Amazon and that its large network of brick and mortar retail outlets present a competitive advantage. By increasing its online grocery capability, Walmart should be able to enjoy sales growth in the future.
“The further that Walmart is able to leverage its physical store locations to reduce costs and connect with consumers, the more it will be able to cut into the e-commerce lead that Amazon has established,” wrote Susquehana analysts in a client note.
Some of the developments in the United States that could have a negative impact on Walmart include a proposal to overhaul SNAP – Supplemental Nutrition Assistance Program. However according to analysts at UBS, the retailers that are most likely to be affected by SNAP reforms are dollar stores.
According to UBS, while between 3% and 4% of sales that Walmart generates in the United States come via SNAP, reduction of benefits will likely not lead to loss of consumers for Walmart as these consumers will keep spending most of their money at the big box retailer while reducing what they spend at other retailers.
Per a survey conducted on 34 analysts by FactSet, Walmart will report $1.37 in earnings compared to $1.30 last year. With regards to revenues Walmart is expected to increase sales from last year to reach a figure of $134.9 billion compared to last year’s $130.9 billion per the FactSet consensus. The rate of same-stores sales growth is expected to hit 2.1%.
In the past two quarters Walmart has managed to beat revenue estimates. And while the big box retailer managed to beat estimates in relation to same-store sales during the last quarter, Walmart missed estimates with regards to the two quarters that preceded last quarter.