On Monday, Stifel, a full-service brokerage and investment banking firm, expressed a positive outlook on shares of Costco Wholesale Corporation (NASDAQ:COST) and Walmart Inc. (NYSE:NYSE:WMT). The firm's stance comes in light of a survey indicating that while U.S. consumer spending intentions remain positive, they have shown a notable decline over the past six weeks compared to year-to-date averages through late June. The survey also pointed to a year-over-year decrease in back-to-school spending intentions, with a significant weakening across nearly all income levels.
The most pronounced decline was observed among consumers earning less than $50,000 per year. In contrast, spending intentions among those earning more than $75,000 per year are slowing but continue to increase. Stifel's analysis suggests that retailers gaining market share, particularly Costco and Walmart, are likely to benefit from these trends. The firm's findings are based on data showing both companies have gained a meaningful share of U.S. grocery purchases since 2019.
In terms of consumer staples, the survey highlighted that private label spending intentions remain high. Respondents reported the most significant trade-down activity in grocery categories such as packaged foods, snacks, and household products. Meanwhile, pet food and beauty categories appear to be at the least risk of trade-down, indicating a more resilient consumer spending pattern in these areas.
In other recent news, Walmart is set to announce its second fiscal quarter results, which are anticipated to surpass expectations for revenue and earnings. Analyst firms CFRA, BMO Capital Markets, and KeyBanc have all recently upgraded their price targets for Walmart, reflecting confidence in the retail giant's financial prospects. CFRA, in particular, anticipates a year-over-year increase of 3.5% in Walmart's U.S. sales, excluding fuel, and an adjusted earnings per share growth of 11% to $0.68.
InvestingPro Insights
In light of Stifel's upbeat perspective on Walmart Inc. (NYSE:WMT), InvestingPro data and tips provide additional context for investors considering this retail giant. Walmart has demonstrated a consistent ability to reward its shareholders, having raised its dividend for an impressive 29 consecutive years, with a notable dividend growth of 9.21% over the last twelve months as of Q1 2023. This consistent dividend performance, coupled with a dividend yield of 1.22%, solidifies its reputation as a reliable income stock.
InvestingPro data also reveals that Walmart is trading at a high Price/Book multiple of 6.8, which may indicate a premium market valuation relative to its book value. However, the company's P/E ratio stands at 29.73, which, when compared to its near-term earnings growth, suggests that the stock is trading at a low P/E ratio, providing an attractive entry point for those looking at earnings potential. Additionally, Walmart's revenue growth is on an upward trajectory, with a 5.68% increase over the last twelve months as of Q1 2023, reflecting its strong position within the Consumer Staples Distribution & Retail industry.
For investors seeking a deeper dive into Walmart's financial health and future prospects, there are 9 additional InvestingPro Tips available at https://www.investing.com/pro/WMT. These insights can help fine-tune investment strategies and decisions in the context of the current economic environment and consumer spending patterns.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.