Shares of Walmart WMT have surged over the last six months and continued to climb recently even as the market fell. Clearly, it seems that investors have reason to be excited about Walmart at the moment. The question is will this continue?
Walmart announced on Thursday its Black Friday holiday shopping plans for this year as it tries to fight off rivals Target TGT and Amazon AMZN . In an effort to boost sales during the holiday shopping period the company plans to offer deals "earlier than ever." Walmart kicked off some online deals Thursday, with more set to start the on November 21, which is the Wednesday right before Thanksgiving.
With that said, Walmart is coming off a quarter that saw its U.S. e-commerce sales surge 40%, while U.S. comps jumped 4.5%. This growth marked the discount retail giant's highest domestic same-store sales growth in more than 10 years. Walmart's comps expansion was driven by its grocery and apparel businesses. Meanwhile, overall second-quarter revenues jumped 3.8% to $128 billion.
Investors should also remember that Walmart in August became Flipkart Group's largest shareholder, which is one of India's biggest e-commerce sites. Walmart now owns roughly 77% of Flipkart. Other investors include Tencent TCEHY and Microsoft MSFT . Going forward, Walmart's investment in India could prove to be significant as companies fight to jump into the massive emerging market.
Plus, Walmart has pushed deeper into grocery delivery throughout the U.S., along with the likes of Kroger KR .
Moving on, the S&P 500 has crushed Walmart stock over the last 10 years, up roughly 220% compared to WMT's 99% jump. Yet, the past three years have seen Walmart overtake the index, up roughly 80% compared to the S&P's 36%.
Shares of WMT have soared over 26% in the last six months and 18% during the past three months, while the S&P slipped 2%. Walmart stock closed trading Wednesday at $104.32 per share, which marked an approximately 5% discount compared to its 52-week high of $109.98.
Unfortunately, Walmart's recent climb has caused its valuation picture to appear a tad bit stretched. Walmart stock is currently trading at 22.3X forward 12-month Zacks Consensus EPS estimates, which marks a premium compared to the S&P's 16.7X and its one-year low of 16.5X.
However, WMT stock has traded as high as 23.8X over the past year and only marks a slight premium compared to its industry's 21.1X. Jumping even further back, we can see that Walmart has traded at forward P/Es far higher than its current point.
Moving on, our current Zacks Consensus Estimate is calling for Walmart's quarterly revenues to pop by 1.34% to reach $124.83 billion. Walmart's full-year revenues are expected to jump nearly 3% to hit $515.06 billion. These are hardly a big gains, but significant year-over-year growth is simply much more difficult to come by when you are pulling in this kind of money.
It is also worth noting that Walmart's U.S. comps are projected to climb 2.9%, based on our current NFM estimates. This would mark a bigger jump than the year-ago period's 2.7%, but would fall short of Q2's 4.5% jump.
At the other end of the income statement, Walmart's adjusted quarterly earnings are projected to pop 2% to touch $1.02 per share. Investors should be more pleased to note that the retailer's full-year EPS figure is expected to expand by 8.4%.
Walmart has seen mixed earnings estimate revision activity recently, with more revisions headed in the wrong direction. However, Walmart has topped our quarterly earnings estimates in 11 out of the last 12 periods and is currently a Zacks Rank #3 (Hold), which also sports "B" grades for both Value and Growth in our Style Scores system.
We should also remember that Walmart is a dividend payer. The company raised its current fiscal year cash dividend to $2.08 per share. This marked a 2% jump from the prior year and the 45 th consecutive year Walmart increased its dividend. Still, it might not be the best time to buy Walmart stock at its current valuation and price point, especially with its U.S. comps projected to dip from Q2.
Walmart is set to release Q3 financial results before the opening bell on Thursday, November 15. Make sure to pay close attention to Walmart's e-commerce figures, as they could determine how WMT stock trades in the near-term.
The company is part of a busy week of retail earnings, which includes Home Depot HD , Macy's M , and other giants.
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