An analyst’s recommendation upgrade was the news breathing life into Walmart (WMT 4.29%) stock on Tuesday. The upgrade improved investor sentiment on the stock to the point where it ended the trading day more than 4% higher in value. This was a particularly good performance when matched against that of the S&P 500 index, which closed almost 0.5% lower that day.
Recommendation upgrade
Well before market open, DZ Bank’s Mike Pohn changed his recommendation on Walmart stock to buy from his previous hold. He set his price target for the prominent retail stock at $110 per share, which is nearly 13% higher than its most recent closing price.
The reasons for Pohn’s move weren’t immediately apparent. It surely isn’t coincidental that it came only several trading days after Walmart released its final set of fiscal 2025 results, however.
In the company’s fourth quarter, it managed to grow its revenue by 4% year over year to almost $181 billion while improving non-GAAP (adjusted) earnings per share (EPS) by 10% to $0.66. Both figures edged past the consensus analyst estimates.
A proven performer and a dividend raiser
Stocks trade on future expectations rather than trailing performance, however, and that’s where Walmart fell short in its earnings report. It guided for adjusted EPS of $2.50 to $2.60 for the entirety of fiscal 2026, a range that didn’t come close to the average analyst estimate of $2.77 for the year.
I’m not sure I’d let a single guidance miss dissuade me from putting money into one of the most successful retail operations of all time. I feel Walmart, with its talent for pushing sales and profitability ever higher, will continue to improve its fundamentals well into the future. It should also continue remunerating shareholders, as evidenced by the 13% dividend raise it declared last week.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.
