August 25, 2021 8:00 AM
 — 
3
 min

Walmart has improved its annual forecast

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Walmart saw net income fall 34% in the second quarter of fiscal year 2022 ended July 31, but both adjusted numbers and revenue beat analysts' forecasts. Revenue increased 2.4% to $ 141.05 billion versus $ 137.74 billion a year earlier compared to the market consensus of $ 137.02 billion. Net income for the financial quarter was $ 4.276 billion, or $ 1.52 per share, per compared to $ 6.476 billion, or $ 2.27 per share, received in the comparable period last year. Meanwhile, adjusted earnings rose to $ 1.78 per share from $ 1.56, beating market expectations of $ 1.57. The company's online sales in the US climbed 6%. At the same time, over the past two years, their volume has more than doubled.

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Walmart's updated forecast for fiscal 2022 expects earnings per share to be in the $ 6.2-6.35 range, while LFL sales in the US are expected to rise 5-6% (previously expected to rise by a few percent). In the third financial quarter, the company expects earnings of $ 1.3-1.4 per share on a 6-7% rise in US LFL sales. Experts' forecasts assume respectively $ 1.32 per share and 3.7%.

Keeping customers won in the midst of a pandemic can be challenging, but Walmart will be able to maintain its share through the scale of its business and transforming its operations. Walmart's plans to open new stores are much smaller than in previous years, while investments in e-commerce, high technology and store modernization, on the contrary, have increased significantly. The company intends to develop online sales not only in the United States, but also in the international market.

We love Walmart's global reach, ample opportunity for international growth, increased focus on e-commerce and small regional markets, and support for its own capitalization. Walmart has bought back its own shares in the amount of $ 5.2 billion since the beginning of this year. We believe that the recovery in economic activity and the growth of consumer confidence in the United States will be the key drivers for the growth of the share price. We forecast that positive revenue dynamics will continue in fiscal 2022, so we improve the valuation for the company's stock from $ 170 to $ 175.

Walmart is one of the largest global retailers, with close to $475 billion in annual revenue. The company’s stores offer a variety of merchandise, including grocery, household goods, electronics, health and wellness, hairlines, apparel, and home products. Walmart’s business strategy rests upon its Every Day Low Price (EDLP) philosophy, under which the company assures customers that they are getting the lowest prices. Walmart’s business is segmented into three reporting divisions: Walmart US, Sam’s Club, and Walmart International. Walmart US operates retail stores in the US and Puerto Rico; Sam’s Club operates club warehouses for members to buy items at the lowest prices, and Walmart International encompasses all of the company’s International operations, including Sam’s Club overseas.

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