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Walmart Inc. WMT, +0.17% could announce that lower prices are on the way during its fourth-quarter earnings and virtual investor event, according to MKM Partners.
Both events are scheduled for Thursday.
“In the past, whenever they have been share donors and volumes are going negative year-over-year (as will likely be the case very soon), Walmart has lowered prices to reignite the volume flywheel,” MKM analysts wrote in a February note.
“We are also seeing in regional CPI data a larger discount between Walmart regional pricing and the national average, with the widest measure in the data set being December. This may hint at some sort of price action already taking place.”
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Analysts note that 52% of Kroger Co. KR, +1.00% locations share a zip code with Walmart.
“With grocery as Walmart’s key traffic driving category, a price cut would be most pronounced there,” MKM said.
MKM rates Walmart stock neutral with a $154 price target.
Walmart has an average overweight stock rating and average target price of $161.75, according to 35 analysts polled by FactSet.
Here’s what to watch for when Walmart reports:
Earnings: The FactSet consensus is for EPS of $1.51, up from $1.38 last year.
Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, is forecasting EPS of $1.57.
Walmart has beaten the FactSet EPS consensus 11 out of the 12 past quarters.
Revenue: The FactSet revenue consensus is for$148.50 billion, up from $141.67 billion last year.
The Estimize consensus is for $149.26 billion.
Walmart has beaten the FactSet revenue consensus the last three quarters.
Stock price: Walmart shares have slipped about 2% over the past three months, but have gained 24.2% over the past year.
The Dow Jones Industrial Average is up 7% for the past 12 months.
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Other items:
– Cowen analysts led by Oliver Chen say they’re “encouraged” by the membership trends for Walmart+, the retail giant’s membership program that rivals Amazon.com Inc.’s AMZN, +1.29% Prime program.
“Our survey indicates millennials over-index to the overall population as 14.4% of 18-to-24-year olds have a membership vs. 10.5% of overall households,” analysts said.
Moreover, 28.9% say they are somewhat or very likely to sign up in the next three months.
Cowen says this is a positive indicator for loyalty.
Walmart+, priced at $12.95 per month or $98 a year, offers speedy free shipping with no order minimum, free grocery delivery with a $35 minimum order, and other perks. Walmart+ launched Sept. 1.
Cowen data suggests that 10.5% of the U.S., or about 12 million households, have signed up, with 69.6% saying they use the membership at least once a week.
In Nov. 2020, BMO Equity Research data suggested that 19 million households had signed up for the program. At that time, Cowen estimated that more than 10 million had.
Cowen rates Walmart shares outperform with a $170 price target.
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-SimilarWeb data shows that Walmart’s online grocery traffic tripled, up 200%, year-over-year in the fourth quarter.
U.S. visitors to the Walmart website were up 42% year-over-year, indicating that the company is attracting new users, according to SimilarWeb numbers.
November’s extension of Black Friday sales across multiple days was a traffic driver.
-Over the past few months, Walmart has made a number of announcements, including dozens of additional automated local fulfillment centers, a grocery delivery pilot with HomeValet and a new fintech company.
-JPMorgan analysts expect that COVID-19 will drive Walmart to offer a wider range of earnings-per-share guidance.
Many companies have withheld guidance due to COVID-19-related uncertainty. Among those that have offered a financial outlook, this lack of clarity has been a factor.
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“[G]iven the uncertainty of the year ahead (including food at home normalizing, persistent wage pressures, and rising freight headwinds), we expect a wider range of guidance with EPS likely looping in the Street at the top end,” analysts wrote.
JPMorgan rates Walmart shares neutral due to concern about the impact that the changing COVID-related conditions will have on this business and others that sell staples.
“[W]e find the valuation full and believe that the hardest part is ahead with its high share in the hyper-competitive grocery market (25% share) and low share in general merchandise (~6%) where Amazon dominates online,” analysts wrote.
“COVID-19 should only accelerate curbside and delivery investments from its grocery peers while the CPG [consumer packed goods] category likely just experienced an inflection online.”
JPMorgan has a $157 price target on Walmart.
