Marvin Samuel Tolentino Pineda
Walmart (NYSE:WMT) is set to report earnings on August 15 amid rising expectations following a 29% increase year to date. Analysts are in agreement to expect Walmart (WMT) to report sales of $167.3 billion, EPS of $0.65, and U.S. same-store sales growth of 1.5%. 3.3%. The general view is that Walmart (WMT) will continue to benefit as a defensive stock if uneasy trading continues in global markets, but the retail sector as a whole will be keeping a close eye on the Bentonville retail giant’s moves with U.S. consumers.
Morgan Stanley expects another huge quarter for Walmart (WMT) as it demonstrates its market share leadership amid a worsening consumer environment. Analyst Simeon Gutman believes that if Walmart (WMT) matches comparable sales expectations, the company’s stock price would be acceptable, especially with the overall retail industry slowing. “Given the weak July retail data, the increased risk of a consumer slowdown, and the upcoming election in the second half of 2024, maintaining guidance amid this uncertainty should be acceptable,” he emphasized.
Oppenheimer analyst Rupesh Parikh is a bit cautious on Walmart (WMT) earnings guidance. He takes a more conservative view on the setup given the recent strong outperformance and potentially aggressive Street sales expectations for Q3. “At this point, with current subdued inflation, management could raise EPS guidance for FY24 (Jan 2025), but keep full-year sales real currency (cc) growth at the high end or just above the 3-4% range,” Parikh noted. Oppenheimer’s view is that investors should be poised to take advantage of profit-taking if it materializes, rather than looking for positive catalysts in upcoming earnings guidance. Walmart (WMT) remains Oppenheimer’s top pick.
Seeking Alpha analyst Uttam Dey believes that the combination of higher-margin digital advertising revenue and growing membership numbers should boost Walmart’s (WMT) margin profile. Day believes Walmart (WMT) can achieve a 9.6% compound annual growth rate in operating income, with margins expanding by about 20 basis points annually, on average. However, with expectations clearly rising and the market likely pricing in higher-than-expected earnings guidance and increases from Walmart (WMT), Day believes the stock could remain range-bound for a few months if Walmart (WMT) expectations are conservative.
On the earnings call, investors will expect Walmart (WMT) to discuss margin headwinds for the rest of the year and details on its U.S. sales mix, which ranges from general merchandise to groceries to health and wellness. Investors will also hear whether Walmart (WM) was able to deliver strong global advertising business growth of over 30% in the first quarter.
Options trading suggests that Walmart (WMT) shares will rise 5% after it releases its second-quarter earnings report. Notably, shares rose 7% after the first-quarter report was withdrawn. The retailers with the highest trading correlation to Walmart (WMT) after earnings reports are BJ’s Wholesale Club (BJ), Costco (COST), Ollie’s Bargain Outlet Holdings (OLLI), and Best Buy (BBY). Analysts also point to grocery store stocks Albertsons Companies (ACI), Kroger (K), and Sprouts Farmers Market (SFM) as three stocks that could react to Walmart’s (WMT) announcement. The ETFs with the most exposure to Walmart (WMT) include Consumer Staples Select Sector SPDR Fund ETF (XLP), Vanguard Consumer Staples Index Fund ETF (VDC), VanEck Retail ETF (RTH), and iShares U.S. Consumer Focused ETF (IEDI).
