Walmart’s Value Proposition Shines as Search for Value Persists; Shares Fairly Valued

We think wide-moat Walmart's fiscal 2023 fourth-quarter results showcased its reputation as a value leader. However, management's weaker fiscal 2024 outlook reflects an uncertain economic backdrop and further margin degradation from unfavorable mix shift (towards grocery and the health & wellness categories, at the expense of general merchandise), albeit at a lesser degree relative to fiscal 2023. In this context, management's guidance of 2.5%-3% sales growth and adjusted EPS of $5.90-$6.05 falls short of our 3.3% and $6.79 respective estimates. We plan to adjust our near-term estimates to be in line with the updated outlook, but our long-term forecast of low-single-digit sales growth and mid-single-digit adjusted operating margins remains intact. As such, our existing $144 fair value estimate should not change materially, leaving shares fairly valued.