Is now a good time to buy?

Walmart Inc. WMT continues to strengthen its position as a dominant force in both brick-and-mortar and e-commerce. The world’s largest retailer has seen its shares rise 14.2% over the past three months, outpacing the industry’s 12.3% gain. The company’s unmatched scale and operational agility have also helped it outpace the broader Zacks Retail-Wholesale sector and the S&P 500’s gains of 2.8% and 7.1%, respectively.

In the last trading session, Walmart shares closed at $68.24, quite close to its 52-week high of $69.04. This closeness underscores investor confidence and market optimism about the prospects of the multi-channel retailer. Moreover, the stock is trading above its 50-day and 200-day moving averages, signaling strong upside momentum.

From a valuation perspective, we see the stock trading at a trailing-12-month P/E ratio of 27.03, which is above the industry average of 24.78 and also closer to the five-year high of 27.37. This premium valuation reflects investors’ willingness to pay for Walmart’s expected growth and stability. However, the important question is — will Walmart maintain its impressive earnings trajectory?

WMT is trading above its 50-day and 200-day averages

Image Source: Zacks Investment Research

Decoding Walmart’s Omni-Channel Excellence

With more than 10,500 stores across multiple brands and formats in 24 countries, Walmart has built innovative omnichannel experiences from the ground up to meet customers’ growing need for speed and convenience. The company is strengthening its physical fleet, which plays a dual role by serving customers face-to-face while also delivering a significant portion of the company’s e-commerce sales. Walmart has focused on redesigning its stores, seeking to improve them with advanced in-store and digital innovations.

Integrating online and offline channels, including in-store pickup, same-day delivery and ship-from-store options, has helped provide customers with a seamless shopping experience both domestically and internationally. The company has also taken a number of steps to improve its merchandise assortment. These strategies are increasing Walmart’s competitive advantage by allowing it to reach a broader customer base and increase sales volume.

The company’s strategic investments in technology and e-commerce have made it a formidable competitor in the online retail space. Initiatives such as Walmart GoLocal, Walmart Luminate, Walmart Connect and Sam’s Club MAP demonstrate Walmart’s commitment to improving customer experiences and operational efficiency.

In addition, Walmart’s delivery capabilities and services set a new standard in retail logistics, combining efficiency with customer-centric innovation. Through its Walmart+ membership program and services such as Express Delivery, the company strengthened its delivery capabilities, which were a key driver of e-commerce.

In the latest quarter, Walmart’s global e-commerce sales grew 21% across pickup and delivery stores and marketplaces, and accounted for 18% of the company’s total net sales. E-commerce penetration increased in all markets. This remarkable performance underscores Walmart’s successful adaptation to the digital age and its potential for sustained e-commerce expansion.

In today’s marketplace, where consumers demand flexibility and convenience, Walmart’s omnichannel capabilities are more important than ever. Many other retailers, such as Kroger KR, Costco COST and Objective TGT continually improves its multi-channel solutions to stay ahead of the market.

Is WMT really the dividend king?

Walmart’s financial strength and commitment to returning value to shareholders have made it popular as the dividend king. The supermarket giant boasts a solid dividend history, having raised dividends for 50 consecutive years. This steady commitment to dividend growth underscores Walmart’s financial flexibility and solid cash flow generation.

During the first quarter of fiscal 2025, the company paid $1.7 billion in dividends and repurchased $1.1 billion in stock. At the time of its first-quarter earnings release, the company had $15.5 billion remaining under its share repurchase plan. Walmart currently has a dividend payout of 35.8% and a dividend yield of 1.2%. With an annualized free cash flow return of 8.9%, the dividend payments are likely sustainable.

Walmart’s dividend policy reflects a balanced approach, combining consistent shareholder returns with cautious reinvestment in the business. This strategy suggests the company can maintain its leadership position in the retail space while rewarding its shareholders with reliable and growing dividends.

Future development prospects?

Walmart’s strong omnichannel initiatives and highly diversified business tell a good story of its growth. Strengths like these, along with a growing advertising business and effective cost-cutting measures, pave the way for a bright future. Encouragingly, Walmart raised its fiscal 2025 guidance on its latest earnings call.

The company expects fiscal 2025 consolidated net sales growth to be in the high end of or slightly above the range of 3-4% on a constant currency or dollar basis. Consolidated operating income growth is now expected to be in the high end of or slightly above the range of 4-6% on a dollar basis. Finally, Walmart projects fiscal 2025 adjusted earnings per share to be in the high end of or slightly above the range of $2.23-$2.37, suggesting growth from the $2.22 reported in fiscal 2024.

Estimates paint a clear picture

Reflecting the positive sentiment surrounding Walmart, the Zacks Consensus Estimate for earnings per share has been revised upward. Over the past 30 days, analysts have increased their estimates for the current and next fiscal years by 0.4% to $2.43 and by 0.8% to $2.67 per share, respectively. These estimates imply year-over-year growth rates of 9.5% and 10.1%, respectively.

Image Source: Zacks Investment Research

Creating an investment mantra

Walmart’s recent stock performance, combined with its strategic investments in technology, e-commerce and omnichannel capabilities, bodes well for continued growth. The company’s business stability, strong financial health and commitment to shareholder returns make it an attractive choice for investors seeking long-term growth. Despite its current overvaluation, the potential for continued expansion and market share gains justifies a premium.

In summary, we believe that investing in Walmart now is a chance to capitalize on its growing success and secure a stake in one of the most resilient and innovative retailers in the market. Rightfully, Walmart currently has a Zacks Rank #1 (Strong Buy). You can see The complete list of today’s Zacks #1 Rank stocks here.

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