Shares of Walmart Inc. jumped further into record territory Tuesday amid a busy day for the discount retail giant, which reported an earnings beat, confirmed a $2.3 billion deal to buy smart-TV maker Vizio Holding Corp.
VZIO,
and raised its dividend by 9%.
Under the terms of the deal, Walmart
WMT,
will pay $11.50 for each Vizio share
VZIO,
outstanding, which represents a 20.7% premium above Friday’s closing price of $9.53.
“Our announcement today that we’ve agreed to acquire Vizio gives us the opportunity to reach and serve customers in new ways, and connect more dots for those that advertise with us,” said Chief Executive Doug McMillon in the post-earnings call, according to a FactSet transcript.
Global advertising is one of Walmart’s faster-growing businesses. The ad business climbed 33% during the fourth quarter, and grew 28% for the year to reach $3.4 billion.
Walmart expects the deal to slightly reduce earnings in the near term, given transaction-related costs, such as employee retention and technology integration.
Walmart’s stock powered up 5.8% in morning trading, which puts it on track for the biggest one-day gain in 15 months. The stock’s $9.94 price gain would add about 66 points to the price of the Dow Jones Industrial Average
DJIA,
which fell 66 points, or 0.2%.
Vizio shares shot up 15% toward a 15-month high. The Wall Street Journal reported last week that the companies held talks about a deal.
On the downside for Walmart, the company provided a current-quarter profit outlook below expectations.
For the quarter to Jan. 31, Walmart reported net income that fell to $5.49 billion, or $2.03 a share, from $6.28 billion, or $2.32 a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share of $1.80 beat the FactSet consensus of $1.64.
Total revenue grew 5.7% to $173.39 billion, above the FactSet consensus of $170.85 billion.
Walmart U.S. same-store sales, or stores open at least a year, rose 4.0% to beat the FactSet consensus of 3.3% growth, as the number of transactions increased 4.3% while the value of the average transaction slipped 0.3%.
CEO McMillon said general merchandise prices were lower than a year ago, including for clothes. Food prices were lower in places including eggs and deli snacks, but were higher in places like asparagus and black berries.
Meanwhile, prices for dry grocery and consumables, such as paper goods and cleaning supplies, were up in the mid-single-digits percentage range from last year, McMillon said.
Sam’s Club same-store sales rose 3.1% to top expectations of a 2.7% increase, as transactions rose 3.6% while the average ticket was down 0.4%.
Looking ahead, the company expects first-quarter adjusted EPS of $1.48 to $1.56, below the FactSet consensus of $1.60, and guides for full-year adjusted EPS of $6.70 to $7.12 versus expectations of $7.06.
Walmart raised its annual dividend rate to $2.49 a share from $2.28. The company said the 9.2% increase is the largest dividend boost in over 10 years.
After the stock’s three-for-one split takes effect on Feb. 26, the annual dividend rate will be 83 cents a share and the quarterly dividend will be 20.75 cents a share. The new dividend will be paid out on April 1 to shareholders of record on March 15.
Based on current stock prices, the new annual dividend rate implies a dividend yield of 1.38%, which compares with the implied yield for the S&P 500 index
SPX
of 1.44%.
The stock has rallied 16.1% over the past three months, while the Dow has advanced 9.7%.
Read the full article here
