Evercore ISI Analyst Lowers Walmart's Price Target by 5.3%

Evercore ISI Group's Greg Melich lowered their price target on Walmart (NYSE: WMT) by 5.3% from $187 to $177 on 2023/11/17. The analyst maintained their Buy rating on the stock.

Melich's decision to lower the price target comes after assessing Walmart's Q3 2024 earnings report, which was released on November 16, 2023. While the report showed a 4.9% U.S. comp and flattish EBIT dollars, Melich expressed concerns about potential execution hiccups. However, the analyst also acknowledged that the "algorithm is not broken," pointing to the 3% to 4% revenue growth and double that for operating income growth.

According to Melich, Evercore ISI expects Walmart to leverage next year despite likely comp moderation. The firm believes that automation gains scale, wage expense moderates, and high-margin advertising and alternative revenues will contribute to the company's growth.

In Q3 2024, Walmart reported earnings per share (EPS) of $1.53, in line with the Zacks Consensus Estimate but beating Q3 2023's $1.50 by 2%. The company's revenue came in at $160.8 billion, surpassing the Zacks Consensus Estimate of $159.5 billion and showing a 5.2% increase compared to Q3 2023's $152.81 billion. Net sales for the quarter reached $159.44 billion, marking a 5.3% year-over-year growth. Additionally, Walmart's operating income saw a significant surge of 130% year-over-year, reaching $6.20 billion.

Looking ahead to FY 2024, Walmart's management has provided guidance, anticipating EPS in the range of $6.40 to $6.48. The company expects net sales growth of 5% to 5.5% and operating income growth of 7% to 7.5%.

Walmart's President & CEO, Doug McMillon, expressed satisfaction with the strong revenue growth across segments in the quarter. He also highlighted the company's readiness to serve customers and members during the holiday season, emphasizing Walmart's commitment to providing affordable options and quality products.

Following the release of Walmart's Q3 2024 earnings report, other analysts have also updated their ratings and price targets for the stock. Mark Astrachan from Stifel Nicolaus lowered their price target by 1.2% to $169 but maintained a Hold rating. Scot Ciccarelli of Truist Securities raised their price target by 1.2% to $170, also maintaining a Hold rating. Simeon Gutman of Morgan Stanley lowered their price target by 1.2% to $168 but maintained a Strong Buy rating.

Currently, 84.2% of top-rated analysts consider Walmart a Strong Buy or Buy, while 15.8% see it as a Hold. No analysts recommend selling the stock.

The consensus forecast among analysts is that Walmart's upcoming year will deliver earnings per share (EPS) of $5.93. If this prediction proves accurate, it would represent a 14% increase in EPS on a year-over-year basis.

In terms of stock performance, Walmart has seen a 5.1% increase year-over-year. However, during the same period, it has trailed behind the S&P 500, which has shown a 14% increase.

Greg Melich, the analyst who revised Walmart's price target, is ranked in the top 20% of Wall Street analysts by WallStreetZen. Melich specializes in the Basic Materials, Consumer Cyclical, and Consumer Defensive sectors, with an average return of 6.6% and a 60% win rate.

Walmart Incorporated operates various retail, wholesale, and other units in the U.S. and internationally through its three segments: Walmart U.S., Walmart International, and Sam's Club. The company operates a wide range of stores, including supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, discount stores, membership-only warehouse clubs, and e-commerce websites. Walmart, founded in 1945, is headquartered in Bentonville, AR.

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