Retailer Walmart (WMT 0.54%), long known for its thin-margin, discount-pricing model, has celebrated a series of financially successful years as it reaps the rewards of its technology investments.
Full-year financial results for Walmart's fiscal year ended Jan. 31, 2024, and the quarter ended April 30, 2024, show strong momentum. Shoppers are flocking to its stores and utilizing its e-commerce channels in growing numbers. The stock has responded, hitting 52-week highs.
NASDAQ: WMT
Key Data Points
Taking a close look at Walmart's recent financials
For the full 2024 fiscal year, Walmart reported results that more than justify its current stock price. Consolidated revenue grew 5.5% in constant-currency terms for the year. Generally accepted accounting principles (GAAP) net earnings per share were $5.74 and $6.65 on an adjusted basis. The company generated $15 billion in free cash flow, a $3 billion increase.
Of particular note for investors is the 23% increase in e-commerce sales in the fourth quarter of fiscal 2024, and the full-year increase of 28% in global advertising revenue. The robust growth continued in the first quarter of fiscal 2025, with e-commerce sales up 21% and advertising revenue up another 24% from the year-earlier period.
The results show a company executing a successful strategy that resonates with its customers. The in-store retail business is notoriously low-margin. Revenue for advertising and e-commerce have the potential to provide much higher margins, so Walmart's growth in these non-store revenue streams offers hope for overall margin expansion in the future. Developing these potential profit centers should offer even more reason for growth in Walmart's stock price. The question is, can it keep up the stellar performance?
Walmart is excited about the future
The financial news has been excellent, and Walmart is convinced that further success lies ahead. The company raised its dividend by 9% for the current fiscal year. The new annual dividend of $0.83 is yielding about 1.3%. Additionally, the company still has over $15.5 billion available for its share-repurchase program.
Walmart's purchase of Vizio, which is still pending regulatory review, is projected to further boost its advertising revenue. In acknowledgement of its favorable market position, Walmart announced that net sales and operating income for the current fiscal year are expected to be at the high end, or slightly higher, than initial guidance.
Walmart is a better buy than Target right now
Walmart's excellent results and potential for growth are best seen in comparison to competitor Target.
| Company | Most Recent Full-Year Sales Increase/(Decrease) | P/S Ratio | Dividend Coverage Ratio | Dividend Payout Ratio | Dividend Yield |
|---|---|---|---|---|---|
| Walmart | 6% | 0.81 | 2.53 | 36.6% | 1.3% |
| Target | (1.7%) | 0.63 | 2.06 | 49.1% | 3% |
Calculations by author. Walmart fiscal year ended Jan. 31, 2024; Target fiscal year ended Feb. 3, 2024.
It is true that on the surface Target currently sports several more attractive valuation metrics. However, Walmart's sales, cash flow, and net income growth make future dividend increases a distinct possibility, especially since its dividend payout ratio is 25% lower than Target's.
While Walmart's shares appear more richly valued, the current share price is not fully reflecting the fact that Walmart is winning the competition for shoppers, with Target reporting sales declines for the most recent full year and quarter.
Walmart's increasing sales growth for similar time periods, growing noncore revenue streams, and the cash-flow strength to grow dividend payouts makes it clear that Walmart currently represents the better value. Despite recently making 52-week highs, Walmart stock still offers investors the better opportunity for growth in earnings, dividends, and multiple expansion.
