Despite the economic turmoil, retail sales were unexpectedly high last month, indicating that consumer spending is not slowing down. Hence, retail industry leader Walmart Inc. (WMT) looks poised to thrive, given its naturally hedged businesses. So, you should wait no further and load up WMT shares.

WMT reported better-than-expected fiscal 2023 fourth-quarter earnings and topped both the EPS and revenue analysts’ estimates. The company saw continued substantial market share gains in grocery, including high-income households.

During the fiscal year 2023, WMT added $38 billion in sales globally and crossed $600 billion in revenue for the first time in the company’s history. Internationally, the company recorded positive sales growth in most markets, driven by successful global festive and double-digit growth in Walmex and China.

Moreover, the retail giant finished its last quarter with inventory about flat to last year, which is fantastic, given the macroeconomic issues. It remains optimistic and expects higher-income families will continue shopping in WMT across categories because of its omni-channel experience of pickup, delivery, and membership benefits.

Furthermore, the company expects a modest consolidated net sales growth of 2.5-3% in constant currency in the current fiscal year, 2024.

The stock has gained 14.8% over the past nine months to close the last trading session at $142.47.

Here is what could influence WMT’s performance in the upcoming months:

Positive Recent Developments

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.

On January 5, WMT announced that it had successfully operated 36 drone delivery hubs across seven states, including Arizona, Arkansas, Florida, North Carolina, Texas, Utah, and Virginia. Over the past year, Walmart has safely completed more than 6,000 deliveries to customers in as little as 30 minutes.

WMT is uniquely positioned to offer drone delivery at scale, with its 4,700 stores located within 90% of the U.S. population, which might benefit the company significantly.

Robust Financials

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 came in at $1.71, up 11.8% year-over-year.

Attractive Dividend Payouts

WMT’s BOD had approved an annual cash dividend for the fiscal year 2024 of $2.28 per share, an increase of approximately 2% from the $2.24 per share paid for the last fiscal year.

WMT’s annual dividend yields 1.60% on the current price level. Its four-year average yield is 1.67%, and its dividend payouts have grown at a 1.9% CAGR over the past three years.

John David Rainey, executive vice president and chief financial officer at WMT, said, “Dividends continue to be a part of our diversified capital returns approach. We’re proud to be increasing our annual dividend for the 50th consecutive year, a milestone for our company.”

High Profitability

WMT’s trailing-12-month ROCE, ROTC, and ROTA of 14.60%, 8.71%, and 4.80% are 48.2%, 41.2%, 35.5% higher than the industry averages of 9.85%, 6.17%, and 3.54%, respectively.

WMT’s trailing-12-month asset turnover ratio of 2.50x is 199.8% higher than the 0.84x industry average.

Lower Valuation

WMT’s forward EV/Sales multiple of 0.70 is 57.4% lower than the industry average of 1.65. In terms of forward Price/Sales, it is currently trading at 0.61x, which is 46.9% lower than the industry average of 1.15x.

Its forward Price/Cash flow multiple of 13.37 is 2.7% lower than the 13.74 industry average.

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 0.53.

It has a B grade for Growth, consistent with its robust financials. Its B grade in Value is justified by its lower-than-industry valuations.

WMT is ranked #3 out of 39 stocks in the Grocery/Big Box Retailers industry.

To access additional WMT grades for Momentum, Sentiment, and Quality, click here.

Bottom Line

WMT’s solid market positioning should help it thrive regardless of the economic uncertainties. The company is confident in its omnichannel consumer experience to boost its revenue.

Moreover, the company has 49 years of consecutive dividend growth history. Given its robust fundamentals, the stock might be an ideal buy in 2023.

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 George Weston Ltd. (WNGRF).

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WMT shares were unchanged in premarket trading Monday. Year-to-date, WMT has gained 0.48%, versus a 3.65% 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. More...

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