Walmart earnings preview: Walmart’s exposure to lower-income consumers gives analysts pause Earnings Outlook

By Tonya Garcia

Walmart Inc.’s exposure to lower-income shoppers who are feeling the pressure of inflation is cause for concern to Truist Securities heading into the retail giant’s fiscal first-quarter earnings, scheduled for Tuesday before the opening bell.

“[W]e are growing increasingly cautious on the spending power of low-to-middle income consumers due to less government stimulus, 40-year high inflation and flattening wage growth,” analysts led by Scot Ciccarelli wrote in a report.

“Given this headwind, coupled with the stock’s recent outperformance, we believe that it may be more difficult to generate incremental upside from current levels.”

Walmart’s stock /zigman2/quotes/207374728/composite WMT +0.86% has gained a little more than 1% this year through morning trading on Friday, while the SPDR S&P Retail exchange-traded fund /zigman2/quotes/206947004/composite XRT +0.98% has tumbled 26% and the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.05% has shed 12%.

Truist rates Walmart stock hold.

Read: Lower-income consumers will start tightening their belts by trading down to private label goods in 2022, analysts say

That said, both Truist and Cowen analysts are upbeat about Walmart’s grocery business, with Cowen analysts expecting Walmart to continue market-share gains amid inflationary pricing, which is making shoppers more budget conscious.

“Both Walmart and Target are creatively working through rising input costs while passing on some of the increases to shoppers,” wrote Cowen analysts.

“We are impressed Walmart has been able to slightly widen their price gaps versus competition (as of 4Q22), which has helped the retailer gain market share.”

Cowen rates Walmart stock outperform with a $180 price target, up from $165.

Target Corp. /zigman2/quotes/207799045/composite TGT +0.81% is scheduled to report first-quarter earnings on Wednesday before the market opens. Cowen also rates Target stock outperform with a $265 price target.

Walmart has an average overweight stock rating, based on 35 analysts polled by FactSet. The average target price is $166.03.

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Here are other items to know heading into Walmart’s earnings.

Earnings: The FactSet consensus is for earnings per share of $1.48, down from $1.69 last year.

Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, forecasts EPS of $1.54.

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