Wal-Mart Stores Inc WMT 0.88% failed to impress Wall Street with its second-quarter earnings report, despite topping consensus expectations across the board.
With Walmart’s stock already up 30 percent since the beginning of 2016, Baird analyst Peter Benedict says the company may not have done enough to wow investors, but there were still plenty of positive takeaways from the quarter.
Ahead Of The Pack
Walmart looks most impressive when compared to the rest of the struggling U.S. retail sector. Just the fact that Walmart was able to deliver healthy traffic numbers, impressive e-commerce growth, and modest top- and bottom-line growth make it stand out among its peers.
According to Benedict, Walmart’s valuation is starting to get a bit stretched following its recent run, but long-term investors should remain patient while the company continues to execute its online strategy and improve profitability.
Breaking it Down
U.S. e-commerce growth came in at 60 percent in the second quarter. Benedict said the strength in online sales demonstrates that value initiatives, including free two-day shipping and discounts on non-store items, appear to be gaining traction among shoppers.
U.S. comps were up 1.8 percent on the quarter, driven mostly by a 1.3 percent uptick in traffic. Benedict said Walmart’s online grocery rollout, which is now available in more than 900 stores, is helping the company gain market share from rivals.
“While WMT’s ~18x NTM EPS multiple is above its three-year average of ~16x, CEO Doug McMillon’s offensive strategy is generating real momentum at a time when many other retailers are struggling to maintain relevancy,” Benedict wrote.
Shareholders shouldn’t expect…
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