Walmart’s share price hit an all-time high this week after the retail giant announced better-than-expected fourth quarter financials alongside two big strategic plays – the acquisition of smart TV manufacturer Vizio and a substantial dividend hike.
The market reacted favorably to yet another robust earnings beat for Walmart. Adjusted EPS came in at $1.80, handily surpassing average analyst predictions of $1.61. Meanwhile, overall revenue grew nearly 6% year-over-year to reach $173.4 billion, driven partly by a 23% uptick in global e-commerce sales.
As inflation hovered at elevated levels throughout Q4, value-focused shoppers filled Walmart’s coffers. Management indicated that Walmart grabbed additional market share across general merchandise categories. More surprisingly, the discount chain has started making serious inroads with higher income consumers – two-thirds of Walmart’s recent gains have come from households earning over $100K per year.
Alongside positive Q4 results, Walmart unveiled plans to acquire smart TV platform Vizio for $2.3 billion. This move aims to supercharge Walmart’s surging advertising division, which already generates $3 billion annually. By owning Vizio’s software, data capabilities and streaming footprint, Walmart will gain immense visibility into consumer behavior both online and in living rooms across America.
Billy Hulkower, senior equity analyst at Wolfhook Capital, told reporters he expects seamless integration between Vizio and Walmart’s media network. “This deal brings linear and CTV ad inventory together on one platform. Walmart’s ad partners – including big CPG brands like P&G and Coca-Cola – will salivate over this type of consolidated reach,” he said. “It translates to enhanced targeting and sales lift.”
The third piece of bullish news came when Walmart declared a 9% dividend hike to $0.83 per share annually – its largest bump since 2010. Brian Nagel, veteran retail analyst at Oppenheimer, sees the bigger dividend as confirmation that Walmart’s flywheel is spinning faster than ever before. “Management is wisely rewarding loyal shareholders amid an exceptional period of steady market share gains, margin expansion and cash flow generation,” Nagel noted in a research comment. “Plus, dividends tend to signal leadership’s sunny expectations for coming years, a decidedly positive signal.”
FactSet data reveals Wall Street analysts rate WMT a consensus ‘Buy’ with 12-month price targets implying nearly 10% upside. Bulls point to Walmart’s unique capacity for maintaining low prices, outgunning rivals on grocery and consumables, leveraging physical footprint in digital fulfillment and experimenting with revenue streams like advertising, financial services and healthcare.
Matt Halvorsen, senior portfolio manager at Willow Creek Wealth, increased his WMT position Tuesday morning. “The underlying business momentum remains quite healthy, especially for an established, old economy name like Walmart. Yet shares still trade at just 23 times forward earnings – reasonable for a best-in-breed retailer firing on all cylinders,” Halvorsen said. “Between earnings strength, advertising optionality and dividends, this stock should continue rewarding investors.”
Q4 Results Validate Walmart’s Winning Value Proposition
With multi-decade high inflation squeezing lower and middle income consumers over the past year, many pundits predicted worsening traffic and market share losses for Walmart heading into the holiday season and winter months. But Q4 results defied naysayers, showcasing the durability of WMT’s value proposition even in challenging macro environments.
Impressively, Walmart expanded operating margins year-over-year in Q4 despite surging wages and fuel costs. The retailer credits operating leverage from sales volume coupled with supply chain efficiency gains. Management did note gross margins contracted slightly on a mix shift toward lower-margin general merchandise and aggressive price rollbacks aimed at maintaining affordability — a tradeoff bulls happily accept.
“Walmart simply possesses an unparalleled ability among national retail chains to keep prices low, absorb input cost inflation and still deliver consistent profitability,” said Warren Buffett, CEO of Berkshire Hathaway, on a CNBC interview. “Doug McMillon and team run a well-oiled machine. When the economy softens and consumers get pickier about prices, Walmart wins. Their scale allows them to challenge anyone’s pricing.”
Buffett revealed Berkshire owns nearly $5 billion worth of Walmart shares, making WMT a top-5 holding in the conglomerate’s equity portfolio spanning 70+ companies.
Remarkably, e-commerce grew even faster than brick-and-mortar sales during the winter quarter. Global online revenue jumped 23% following a 15% rise last quarter, fueled by expanding assortment, speedier shipping and greater advertising. Walmart has also made concerted efforts integrating its physical and digital platforms through BOPIS (buy online, pick up in store) and other omni-channel initiatives as preferences rapidly evolve.
Veteran analyst Scott Mushkin at Wolfe Research lauded another “terrific quarter from Walmart U.S.” Mushkin reminded investors that Walmart’s Q4 comps stacked on a strong 8.6% sales increase last year, amplifying the latest result. “Keep in mind that transactions accelerated even as basket sizes moderated, implying Walmart is attracting lots of new shoppers through the doors,” Mushkin commented. “That’s surely the product of fantastic value on everyday household essentials.”
Telsey Advisory Group’s Joseph Feldman too came away impressed at quarterly execution. “The consistency which management delivers on both top and bottom lines quarter in, quarter out is rather astonishing given the current volatility facing most retailers,” wrote Feldman in an investor note with a $210 price target on shares – nearly 30% upside from this week’s all-time highs.
Strategic Vision Culminates in Vizio Acquisition
Alongside posting its 18th straight quarter of positive U.S. comparable sales, Walmart unveiled two game-changing strategic maneuvers clearly aimed at driving long-term market leadership. Exhibit A was the announcement of a $2.3 billion agreement to purchase smart TV operating system Vizio. This surprise deal provides Walmart immediate scale in the rapidly growing connected TV (CTV) advertising arena.
Vizio boasts 18 million active user accounts across its SmartCast software platform available on its own smart TV sets along with third-party displays. The operating system also powers an ad-supported streaming content catalogue that has already emerged as a major CTV player. Vizio captured around 4% share of the crowded CTV ad market last year, pulling in over $500 million in revenue.
Walmart plans integrating Vizio’s tools into its existing media network which already bridges mobile, websites, emails and thousands of physical stores receiving over 200 million weekly visitors. Together under one umbrella, Walmart expects offering unmatched reach for brands seeking impactful omni-channel ad campaigns compared to standalone publishers.
“This deal brings linear and CTV ad inventory together on one platform,” explained Michael Lasser, UBS analyst covering hardline retailers. “Walmart’s ad partners – mainly CPG and food & beverage leaders – will eagerly soak up this type of consolidated reach, leading to better measurement and sales conversion.”
Lasser models Walmart’s ad revenue marching from $3 billion currently toward $10 billion by 2026, assuming proliferation of retail media networks and advertisers allocating additional budgets to CTV specifically. “Combine first-party shopper data with premium streaming inventory and the 20% growth we’ve seen recently in Walmart’s ad business could accelerate to 30-40% for years to come,” Lasser told investors.
The second strategic reveal came in the form of an unexpectedly large 9% dividend increase to an annualized $0.83 per share. Mark Mahaney, senior analyst at Evercore ISI tracking internet companies, explained why this capital allocation decision signals so much promise:
“A dividend boost telegraphs that Walmart’s robust earnings and cash flow outlook remains intact even against the potential for macro turbulence. Very few retailers can get away with this type of shareholder reward amid economic uncertainty. But Walmart plays by a different set of rules given immense scale, pricing power, cash balances and talented leadership.”
Since 2000, Walmart has grown its dividend at aCompound annual rate of 8.7%, providing reliable income compounding for loyal buy-and-hold shareholders. At Tuesday’s $180 share price, the new dividend payout equates to a 0.96% forward yield – hardly yawning, but superior to the ~0.8% offered by retail ETF indexes. With another half-century of payout increases likely ahead, Walmart should continue rewarding patient investors.
What’s Next After Strong Q4?
Despite defying critics last quarter and issuing a blockbuster dividend hike plus transformational acquisition, Walmart leadership offered a somewhat cautious full-year 2025 outlook. Management guided to 3-4% sales growth and 4-6% higher operating profits during the coming fiscal year. Hitting the midpoint would translate into $600 billion in total revenue and $33 billion in operating income.
The conservatism largely owes to uncertain macroeconomic crosswinds and trends in consumer discretionary spending as households adapt to an inflation backdrop retreating from 40-year highs. However, Walmart emphasized its ’everyday low price’ model positions the retailer admirably irrespective of future demand swings and relative to peers.
Encouragingly, Walmart recently announced plans remodeling 500 stores and constructing dozens more units across the U.S. in coming years. This brick-and-mortar investment reinforces management’s belief that physical stores enable key capabilities like online order fulfillment. 90% of America lives within 10 miles of a Walmart, so leveraging real estate for digital commerce and advertising makes immense strategic sense.
On the merchandising front, groceries and consumables likely outperform general merchandise categories in the near term. But Walmart’s improving penetration of toys, clothing, furniture and electronics against the likes of Amazon and Target cannot go overlooked, especially if the company captures greater wallet share among higher earning channel switchers.
Synthesizing an exceptional Q4 performance and strategic advancements in both technology and shareholder returns, analysts nearly unanimously endorse Walmart stock as a smart investment for defensible growth this year and next. “We continue recommending WMT shares to investors seeking stability mixed with upside in an overall choppy retail tape,” said Credit Suisse analyst Seth Sigman. The firm recently reiterated WMT among its top picks with a $220 target.
