Walmart Stock Could Rise on Earnings After a Rough Year - Barron's

Walmart Stock’s Rocky 2018 Could Put It on the Right Path in 2019, Analyst Says

Photograph by Paul L Dineen

Expect cost-cutting and strong U.S. sales out of Walmart when the retail behemoth reports earnings next week, one analyst predicted.

The back story. Walmart stock (WMT) has been battered over the past year, falling 3.5%. And while the stock is up about 4.5% so far for 2019, that return lags the broader S&P 500 by five percentage points. Walmart stock is trailing the market even after it was upgraded last month by Morgan Stanley analyst Simeon Gutman. Gutman cited the company’s investment in “omnichannel” fulfillment, such as Jet.com, in which it is trying to reach younger and more urban shoppers than Walmart’s traditional stores attract. The company does face uncertainty about how a new rule in India that limits vertical e-commerce integration will hit Flipkart. Walmart acquired Flipkart, India’s biggest online retailer, for $16 billion last summer.

What’s new. Baird analyst Peter Benedict predicts strong earnings when Walmart reports on Tuesday before the market opens. “[Walmart] was a winner over the holidays,” Benedict wrote in a recent note, citing online grocery ordering, more toys in stock, and new convenience tools like customized maps for consumers. Benedict said that “recent progress on expense discipline has been encouraging, and our travels with management reinforced the opportunity to drive additional efficiencies across the organization.”

The consensus estimate among analysts is for the company to report $1.33 in earnings per share and $139 billion in revenue, according to Bloomberg.

Moving forward. While 2018 was a rough year for Walmart stock, trends that worried investors, like price cuts and digital investments. could pay off in 2019. Retail has been plagued by questions of disruption more generally. But Walmart’s heft and long-standing operations expertise make it arguably well-placed to grow online market share as it competes with Amazon.com (AMZN).

Walmart stock was up slightly on Wednesday, in line with the S&P 500.

Write to Ben Walsh at ben.walsh@barrons.com

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