The Ratings Game: What really helped Walmart clean up with earnings — robot ‘associates’
Analysts say that Walmart Inc.’s second-quarter results show that each part of the business is putting in the necessary work to achieve growth, even its robot floor cleaners.
Swapping the mops for knowledgeable human interaction with customers is a key part of the changes at the retailer as it competes with online sellers using its own store-and-digital mix.
Walmart WMT, +0.27% reported second-quarter earnings that beat expectations and a 37% increase in e-commerce sales. Revenue of $ 129.39 billion, however, was below the FactSet consensus.
Even with the sales miss, at least six research analyst groups upped their price target for Walmart shares.
“In 2Q, Walmart U.S. was going up against its toughest same-store sales compare in 10 years. Still, it was able to generate 2.8% core same-store sales as it dialed up price investments,” wrote UBS in a note. “Plus, it continues to find new ways to control expenses as it learns from [zero-based budgeting] and increases its use of automation (e.g. FAST unloaders, robot floor cleaners).”
UBS rates Walmart stock neutral with a $ 115 price target, up from $ 107.
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Walmart talked about the significance of automation in an April post on its corporate site.
“Smart assistants have huge potential to make busy stores run more smoothly, so Walmart has been pioneering new technologies to minimize the time an associate spends on the more mundane and repetitive tasks like cleaning floors or checking inventory on a shelf,” said Elizabeth Walker, from Walmart corporate affairs.
KeyBanc Capital Markets analysts think the retail giant demonstrated discipline in its operations, which will provide a tailwind.
“Walmart struck a nice balance between driving operational efficiency and reinvesting for growth,” wrote analysts led by Edward Yruma. “The U.S. consumer environment looks more uncertain, making the strategic and tactical improvements Walmart has made even more vital.”
KeyBanc rates Walmart shares overweight with a price target of $ 128, up from $ 125.
Bank of America says Walmart got some help from the healthy state of lower-income consumers, given the low unemployment rate, the e-commerce business and the continued strength in general merchandise and fresh food.
Analysts rate Walmart stock buy with a price objective of $ 135, up from $ 120.
Stifel also highlights the “relatively good shape” that the U.S. consumer environment is in.
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“Overall, we think Walmart continues to execute well, despite heightened macroeconomic uncertainty and a sustained competitive U.S. retail environment,” wrote Stifel analysts. “For example, SG&A expense leverage and a continued focus on private brand offerings allows the company to reinvest in price and other drivers that have contributed to share gains.”
Stifel rates Walmart shares old with a $ 107 price target, up from $ 105.
Walmart’s price target was also raised at JPMorgan (to $ 115 from $ 110) and Raymond James (to $ 120 from $ 110).
Walmart stock has gained 21.3% for the year to date while the Dow Jones Industrial Average DJIA, +1.20% is up 11% for the period.