A month has gone by since the last earnings report for Walmart (WMT Quick QuoteWMT - Free Report) . Shares have added about 2.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Walmart due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Walmart Q2 Earnings Beat Estimates, E-Commerce Sales Up

Walmart posted solid second-quarter fiscal 2021 results. Adjusted earnings came in at $1.56 per share, surpassing the Zacks Consensus Estimate of $1.22. Moreover, earnings grew 22.8% from adjusted earnings per share of $1.27 reported in the year-ago period.

Total revenues grew 5.6% to $137.7 billion. On a constant-currency or cc basis, total revenues advanced 7.5% to $140.2 billion. The consensus mark stood at $134.9 billion. The top line continued being driven by the burgeoning demand for products across different categories amid the coronavirus crisis. General merchandise sales in the United States were fueled by stimulus payments.

Consolidated gross profit margin expanded 63 basis points (bps) to 24.9%, courtesy of shift in sales mix to higher-margin general merchandise categories, reduced markdowns and improved fuel margins. This was somewhat negated by the carryover of the last year’s price investments. Gross margin in Walmart U.S. grew 42 bps.

Consolidated operating income grew 8.5% to $6.1 billion. Adjusted operating income at cc rose 18.6% to $6.6 billion on the back of solid results in all operating segments. The company said that it saw reduced losses in the Walmart U.S. e-commerce business. However, consolidated operating costs as a percentage of sales escalated 42 bps to 21.2% due to additional costs related to COVID-19, among other factors. Management stated that it incurred additional COVID-19 costs to the tune of $1.5 billion.

Segment Details

Walmart U.S.: The segment’s net sales grew 9.5% to $93.3 billion in the quarter. U.S. comp sales (or comps), excluding fuel, improved 9.3% on the back of a 27% rise in ticket, partly negated by a 14% fall in transactions. Comps were fueled by growth in food and general merchandise. Walmart continued to see customers consolidating their shopping trips, leading to bigger average basket size. Also, the company continued seeing increased shift toward e-commerce.

Notably, both store and online sales remained strong, especially in general merchandise, supported by government stimulus spending. Grocery sales were also robust. E-commerce sales drove comps by 600 bps. E-commerce sales soared a whopping 97% with strength across all channels. Weekly average digital customer count as well as repeat rates grew significantly and boosted e-commerce sales. Also, marketplace sales jumped at a triple-digit rate.

As of the second quarter, Walmart U.S. had nearly 3,450 pickup locations and 2,730 same-day delivery locations. Walmart remodeled 45 stores in the quarter. Adjusted operating income (at cc) at the Walmart U.S. segment grew 18.6% to $6.6 billion.

Walmart International: Segment net sales dropped 6.8% to $27.2 billion, including currency headwinds of about $2.4 billion. At cc, net sales grew 1.6% to $29.6 billion. Results were hurt by the government-led closure of Flipkart in India for part of the quarter. Similar moves in African and Central American markets affected performance. Nonetheless, the company saw seven out of 10 markets registering positive comps, including Walmex, China, Canada and the United Kingdom.

Also, since operations were restored, the GMV at Flipkart surpassed pre-pandemic levels. E-commerce sales had a positive contribution of about 12% to total segment sales, courtesy of solid omnichannel capacities. Adjusted operating income (at cc) rose 11.5% to $1 billion.

Sam’s Club: The segment, which comprises membership warehouse clubs, witnessed a net sales rise of 8.8% to $16.4 billion. Sam’s Club comps, excluding fuel, grew 13.3%. Comps were partly hurt by lower tobacco sales to the tune of around 390 bps. While transactions grew 8.7%, ticket climbed 4.3%. The segment saw broad-based strength across categories, particularly food and consumables. This, in turn, was backed by increased memberships along with benefits from SNAP and government stimulus.

E-commerce fueled comps by 190 bps. Markedly, e-commerce sales jumped 39% at Sam’s Club on the back of a robust direct-to-home show. Segment operating income came in at $0.6 billion, up 23.3% year over year.

Other Financial Updates

In the first half of 2021, the company generated operating cash flow of $19 billion and incurred capital expenditures of $3.6 billion, resulting in free cash flow of $15.4 billion. The company allocated $1.5 billion toward dividend payments during the second quarter.

Walmart ended the quarter with cash and cash equivalents of $16.9 billion, long-term debt (including lease obligations) of nearly $61.3 billion and total equity of $81.2 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Walmart has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Walmart has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.