Walmart earnings preview: Hiring for the retail giant’s advertising business is ramping up, analysts say

Walmart Inc. is beefing up its advertising business with new hires, according to a report from KeyBanc Capital Markets published ahead of the retail giant’s fourth-quarter earnings announcement, scheduled for Thursday.

Walmart Connect, the advertising arm of the business, was up 240% on a two-year basis, according to the November 2021 earnings report.

“Our proprietary job posting scrape points to a significant uptick in promotions and job postings over the past two weeks,” KeyBanc analysts led by Ed Yruma wrote in a Monday note. Analysts highlight previous discussions in which Walmart WMT,
+0.31%
has said the advertising business is a priority.

KeyBanc also notes that advertising became a $31 billion business for Amazon.com Inc. AMZN,
+0.87%
in 2021. Analysts estimate that Walmart’s advertising arm could be a $3 billion EBITDA opportunity.

See: ‘Amazon is not a monopoly’: Earnings show Amazon must rely on alternative businesses, analyst says

KeyBanc rates Walmart stock sector weight.

Walmart has an average stock rating of overweight and average target price of $165.44 according to 38 analysts polled by FactSet.

Here’s what else to know about Walmart heading into the earnings report:

Earnings: The FactSet consensus is for earnings per share of $1.50, up from $1.39 last year.

Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, is forecasting EPS of $1.60.

Walmart has beat the FactSet earnings consensus the last three quarters.

Revenue: The FactSet consensus is for revenue of $151.73 billion, down from $152.08 billion last year.

Estimize forecasts revenue of $153.75 billion.

Walmart has beat the FactSet revenue consensus the last seven quarters.

Stock price: Walmart stock has tumbled 7.2% over the last year. The Dow Jones Industrial Average DJIA,
+1.22%
has run up 11.1%.

Read: Walmart ends mask requirement for vaccinated workers, paid COVID leave to follow

Other items:

Walmart senior executives have left. Walmart has seen members of senior management exit the company, something that Cowen analysts will watch. Among the departures are Brett Biggs, formerly chief financial officer; Scott McCall, the company’s former US merchandising chief; and Janey Whiteside, former chief customer officer.

Cowen rates Walmart stock output with a $165 price target.

US consumer health is an outlook concern. Looking ahead, inflation could have an impact on both Walmart and shoppers.

“[W]ith rising costs and mounting concerns over the financial health of the US consumer, we suspect stock performance will likely come down to the forward guide,” wrote RBC Capital Markets in a note.

“We ultimately think the quarter will be fine, but recognize an uncertain outlook could give investors some pause.”

RBC rates Walmart stock output with a $160 price target.

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“We think Walmart’s EDLP [Everyday Low Price] gained strategy further relevance, especially when compared to traditional grocers who likely passed along inflation to consumers more than Walmart,” said UBS in a note.

Walmart Connect & Marketplace likely gained further traction. These alternative profits should allow Walmart to continue to invest in price throughout FY’23. We believe this will drive further share gains as consumers become more price sensitive in an inflationary environment.”

UBS rates Walmart stock buy with a $180 price target.

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