On Tuesday, Stifel maintained a Hold rating on Walmart shares (NYSE:WMT) with a steady price target of $85.00. Walmart has recently reported robust financial results for the third quarter of fiscal year 2025, leading to an increase in its full-year sales, earnings before interest and taxes (EBIT), and earnings per share (EPS) growth forecasts.
The retail giant recorded a comparable U.S. sales growth of 5.3%, surpassing the anticipated 4.3%. This growth was driven by a 2.1% increase in average ticket size and a 3.1% rise in the number of transactions. Ecommerce played a significant role, contributing 290 basis points to the growth. Walmart's EBIT for the quarter reached $6.7 billion, slightly above the consensus estimate of $6.6 billion.
The EBIT outperformance was largely attributed to the U.S. segment, which saw a profit of $5.4 billion, matching the consensus. The increase in EBIT was primarily due to gross margin expansion as a result of price management and a favorable business mix, although this was partially offset by higher selling, general, and administrative (SG&A) expenses. International and Sam's Club results were reported to be in line with expectations.
In the U.S., general merchandise comparable sales saw a low-single-digit increase, marking an improvement from the previous flat performance in the second quarter of fiscal 2025 and reversing the trend of low-single-digit declines over the four quarters before that.
The grocery segment continued to perform well with mid-single-digit growth, driven by strong sales in food and health and personal care (HPC) categories. Notably, private brand penetration increased by 80 basis points, following a 60 basis points and 30 basis points rise in the first and second quarters, respectively.
The analyst suggests that Walmart's positive results indicate continued market share gains across most of its business segments. Following these announcements, it is expected that consensus estimates for Walmart's performance will see a low-single-digit increase, and the company's stock is predicted to rise similarly.
InvestingPro Insights
Walmart's strong financial performance, as highlighted in the article, is further supported by InvestingPro data and tips. The company's market cap stands at an impressive $675.86 billion, reflecting its dominant position in the retail sector. An InvestingPro Tip notes that Walmart is a "Prominent player in the Consumer Staples Distribution & Retail industry," aligning with the article's emphasis on the company's market share gains across various business segments.
The retailer's revenue growth of 5.43% over the last twelve months, as reported by InvestingPro, corroborates the article's mention of robust financial results and increased full-year sales forecasts. Additionally, Walmart's EBITDA growth of 9.54% over the same period underscores the company's strong operational performance, which is consistent with the reported EBIT outperformance in the article.
Another relevant InvestingPro Tip indicates that Walmart "Has raised its dividend for 29 consecutive years," showcasing the company's financial stability and commitment to shareholder returns. This information complements the overall positive financial picture presented in the article.
For investors seeking more comprehensive insights, InvestingPro offers 16 additional tips on Walmart, providing a deeper understanding of the company's financial health and market position.
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