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Walmart Stock Rises 4.5%: Is Growth in the Offing?

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Walmart Stock Rises 4.5%: Is Growth in the Offing? PART 1 OF 3

Walmart Stock Rises 4.5%: Is Growth in the Offing?

Here’s what management is guiding

Walmart (WMT) stock rose 4.5% on Tuesday, October 10, 2017, following the company’s upbeat outlook for fiscal 2019. Walmart expects both its top and bottom lines to improve in fiscal 2019, driven by higher comps (comparables) and growth in its e-commerce business. It projects a 3.0% rise in its top line on a currency-neutral basis, while its bottom line is expected to rise 5.0% in fiscal 2019. Its e-commerce business is estimated to mark a YoY (year-over-year) improvement of 40.0% in fiscal 2019.

As for fiscal 2018, the company expects its digital business to generate revenue of $11.5 billion. Adjusted EPS (earnings per share) is projected at $4.30–$4.40.

Walmart Stock Rises 4.5%: Is Growth in the Offing?

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New share buyback plan

Walmart has also announced a new share buyback program to replace its existing one. It plans to repurchase $20.0 billion worth of shares in the next two years. In its current program, it repurchased $15.2 billion worth of shares and had about $4.8 billion remaining.

Bill Simon, Walmart’s former CEO (chief executive officer), spoke to CNBC about the share buyback announcement. He believes the company should have used the excess cash in growth initiatives and to solidify its position against Amazon. He also thinks the company’s announcement suggests that its growth opportunities are limited.

However, investors seemed happy about the announcement, as reflected in the uptrend in its stock price.

Stock performance

Walmart stock has risen 21.7% on a YTD (year-to-date) basis as of October 10, 2017. The company’s efforts to strengthen the digital arm of its business and fortify its competitive positioning against online giant Amazon (AMZN) seems to be driving Walmart stock.

In comparison, peers Costco (COST), Target (TGT), and Kroger (KR) have been on a downtrend after the increased threat from Amazon’s Whole Foods deal and the expansion of deep discounters Aldi and Lidl.

On a YTD basis, Costco stock has risen 1.9%, while Target and Kroger have fallen 20.3% and 40.5% YTD, respectively. The S&P 500 (SPX-INDEX) has risen 13.9% YTD.

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