Walmart is a ‘name to own,’ after positive earnings report, analysts say

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Walmart Inc.’s stock rose 1.1% Thursday, boosted by fiscal first-quarter results that beat expectations and the discount retailer’s raised full-year outlook.

Fueled by the results, the stock looks set to snap a four-day losing streak.

“We’re positioned to grow profit faster than sales,” said Walmart

CEO Doug McMillon, during a conference call to discuss the results.

Walmart’s year-over-year revenue growth was 7.3%, while operating income grew 17.3%.

Related: Walmart stock rises after earnings beat and raised full-year outlook, while near-term profit view was below forecasts

Like many retailers, Walmart faced an inventory glut in 2022, but has been tackling the problem, according to McMillon. “We made progress with inventory levels,” he said, during the conference call, adding that the company’s excess inventory “keeps coming down.”

Walmart U.S. inventory declined 9% with higher in-stock levels, the company said in its earnings release.

Speaking during the conference call, McMillon also acknowledged the discretionary spending pressure that was noted by retail rival Target Corp.

“Like their competitor, WMT did see slowing trends throughout the quarter, which is leading to a 2Q guide that is just below consensus,” D.A. Davidson analyst Michael Baker wrote in a note released Thursday. “On balance however, we see the report as favorable and in line with our view that WMT is a name to own in the current economic environment and think the stock should rally on the news.” D.A. Davidson had a buy rating and $178.07 price target for Walmart.

Related: ‘Cleaner’ Target enjoying margin recovery, analysts say

Walmart remains one of analyst firm Jefferies’ top picks. “WMT demonstrated strong Q1 results across the board,” Jefferies analyst Corey Tarlowe wrote in a note released Thursday. “With strong traffic trends, and growing e-comm and private brand penetration, we believe WMT’s well-positioned to gain share ahead.” Jefferies had a buy rating and $175 price target for Walmart.

Of 40 analysts surveyed by FactSet, 31 had an overweight or buy rating and nine have a hold rating for Walmart.

Independent equity research firm New Constructs believed that Walmart is an important bellwether for consumer spending. “Walmart’s better-than-expected earnings show that it’s one of the best businesses in the world and we view Walmart as a very resilient stock, even in the face of inflation and slowing economic growth,” New Constructs CEO David Trainer said in a statement emailed to MarketWatch. “Consumer spending is shifting right now and moving away from pricier goods with a renewed focus on staples, where Walmart’s lower cost offerings are attractive.”

Walmart shares are up 6.6% in 2023, compared with the S&P 500 index’s gain of 8.7%.

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