Amidst turbulence in the banking industry, high inflation, and the Fed’s restrictive monetary policy, uncertainty lingers in the stock market.
Hence, I think investing in Walmart Inc. (WMT), one of the world’s largest and most successful retailers, could be ideal. In this piece, I have discussed why this quality stock is an excellent investment for investors seeking portfolio stability.
WMT reported strong fiscal 2023 fourth-quarter earnings, beating both EPS and revenue estimates. In the fiscal year 2023, the company surpassed $600 billion in revenue for the first time in its history and saw significant market share gains in grocery.
Over the past year, WMT has safely completed over 6,000 drone deliveries to customers in as little as 30 minutes. Since the company has 4,700 stores located within 90% of the American population, its well positioned to provide drone delivery services on a large scale, which could potentially result in significant advantages for the company.
Moreover, the company has omnichannel retail, which integrates online and offline shopping channels to provide customers with a seamless shopping experience. It also includes various options for customers, such as curbside pickup, same-day delivery, and in-store pickup, allowing them to choose the most convenient method to receive their orders.
WMT recently also announced an increase of approximately 2% in its dividend from the $2.24 per share paid for the last fiscal year. While WMT has a four-year average yield of 1.67%, WMT’s annual dividend of $2.28 yields 1.60% on the current price level. Its dividend payouts have grown at a 1.9% CAGR over the past three years. The company has raised its dividend payouts for 49 consecutive years.
The stock has gained 14.9% over the past nine months and 4.2% over the past three months to close the last trading session at $140.42. Also, the stock is currently trading above its 200-day moving average of $136.92.
Here is what could influence WMT’s performance in the upcoming months:
Positive Recent Developments
On February 28, 2023, WMT and Citigroup (C) announced their collaboration to offer the Bridge built by Citi platform to WMT’s 10,000 Small and Medium-sized Businesses (SMBs) within their U.S.-based supplier network.
This platform is expected to enable WMT’s suppliers to gain better access to the capital to expand their businesses and meet their goals.
On January 12, 2023, Walmart Commerce Technologies and Walmart GoLocal announced a partnership with Salesforce.com Inc. (CRM) to give retailers access to the tools and services that enable frictionless local pickup and delivery for customers globally.
Robust Growth
During the fiscal 2023 fourth quarter that ended January 31, 2023, WMT’s total revenues grew 7.3% year-over-year to $164.05 billion. Its income before income taxes rose 86.2% from the prior year’s quarter to $8.90 billion. Also, the company’s consolidated net income grew 59.9% from the year-ago value to $5.81 billion, while adjusted EPS increased 11.8% year-over-year to $1.71.
In addition, its revenue and EBIT have grown at CAGRs of 5.3% and 4.5% over the past three years.
Favorable Revenue Estimates
Analysts expect WMT’s revenue for the fiscal first and second quarters (ending April and July 2023) to rise 5% and 3.6% year-over-year to $147.36 billion and $156.83 billion, respectively.
Furthermore, the company’s revenue for the current fiscal year ending January 2024 is expected to grow 3.6% year-over-year to $621.10 billion. Also, the company has surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
High Profitability
WMT’s trailing-12-month asset turnover ratio of 2.50x is 194.2% higher than the 0.85x industry average. Its trailing-12-month cash from operations of $28.84 billion is significantly higher than the industry average of $369.89 million.
Moreover, its trailing-12-month ROCE, ROTC, and ROTA of 14.60%, 10.47%, and 4.80% are 39/3%, 66%, and 15.2% higher than the industry averages of 10.48%, 6.31%, and 4.17%, respectively.
POWR Ratings Show Promise
WMT’s overall A rating translates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. WMT has an A grade for Stability, in sync with a 60-month beta of 0.49.
WMT also has a B grade for Growth and Quality, consistent with its robust financials and high profitability.
WMT is ranked #3 out of 37 stocks in the A-rated Grocery/Big Box Retailers industry.
Click here to access additional WMT grades for Value, Momentum, and Sentiment.
Bottom Line
The company projected a modest 2.5-3% net sales growth in constant currency for the current fiscal year, 2024.
Moreover, its innovative drone delivery services, omnichannel retail experience, and long-standing commitment to increasing shareholder value make it an ideal buy for investors looking for stability amid macroeconomic uncertainties.
How Does Walmart Inc. (WMT) Stack up Against Its Peers?
WMT has an overall POWR Rating of A. One could also check out these other stocks within the Grocery/Big Box Retailers industry with an A (Strong Buy) rating: Koninklijke Ahold Delhaize N.V. ADR (ADRNY), Ingles Markets Inc. CI A (IMKTA), and Village Super Market, Inc. (VLGEA).
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WMT shares were trading at $140.80 per share on Wednesday morning, up $0.38 (+0.27%). Year-to-date, WMT has declined -0.29%, versus a 4.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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