A month has gone by since the last earnings report for Walmart (WMT Quick QuoteWMT - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.

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

Walmart Q3 Earnings & Revenues Top Estimates, View Raised

Walmart  reported robust third-quarter fiscal 2023 results. Walmart’s adjusted earnings of $1.50 per share increased from the year-ago period’s figure of $1.45. The metric surpassed the Zacks Consensus Estimate of $1.32. Total revenues of $152.8 billion grew 8.7% and beat the consensus mark of $147.4 billion. On a constant-currency (cc) basis, total revenues climbed 9.8%.

Revenue growth was backed by strength in all the company’s segments.
The consolidated gross profit margin contracted by 89 basis points (bps), primarily due to markdowns and a sales mix in the U.S. segment, a LIFO charge at Sam’s Club related to inflation and the timing of Flipkart’s annual event. The gross margin at Walmart U.S. fell 77 bps due to increased general merchandise markdowns and a mix shift toward grocery, somewhat offset by pricing.

The adjusted operating income at cc rose 4.6% to $6.1 billion. Adjusted operating expenses as a percentage of sales declined by 75 bps year over year due to solid sales growth and reduced costs associated with COVID-19. The company’s global advertising business soared more than 30% due to Walmart Connect in the U.S. segment, along with Flipkart advertising.

Walmart U.S.: The segment’s net sales grew 8.5% to $104.8 billion in the reported quarter. U.S. comp sales, excluding fuel, improved by 8.2% due to a 6% increase in the average ticket, with transactions rising 2.1% year over year. Comp sales were mainly driven by strength in food categories, the solid sales of private brands, an elevated average ticket and increased store transactions. Comp sales grew across the grocery and health & wellness categories. The segment continued to see an increased market share in grocery.

E-commerce boosted comps by 80 bps. E-commerce sales in the segment rose 16%. On a two-year stack basis, e-commerce sales surged 24%. As of the third quarter, Walmart U.S. had 4,600 pickup locations and more than 3,900 same-day delivery stores. The company remodeled more than 235 stores during the reported quarter. The operating income of the Walmart U.S. segment jumped 4.8% to $5.1 billion.

Walmart International: The segment’s net sales rose 7.1% to $25.3 billion. Currency movements had a $1.5-billion adverse impact. On a cc basis, net sales jumped 13.3%. The company witnessed double-digit sales growth in Walmex and Flipkart. The operating income, on a cc basis, grew 3.2% to $0.9 billion.

Sam’s Club: The segment, which comprises membership warehouse clubs, witnessed a net sales increase of 12.8% to $21.4 billion. Sam’s Club’s comp sales, excluding fuel, grew 10%. While transactions grew 4.8%, the average ticket rose 4.9%. Comp sales saw broad-based strength across most categories, mainly led by food. However, tobacco hurt comp sales. The membership income climbed 8% in the quarter, reflecting strong membership trends, with a record total member count. The plus penetration rate continued to rise. E-commerce fueled comps by 120 bps.

E-commerce net sales jumped 20% at Sam’s Club on a robust direct-to-home show and solid curbside performance. The segment’s operating income came in at $0.6 billion, up 18.3% year over year.

Guidance

Based on a solid third-quarter show, management raised its guidance for fiscal 2023. Walmart now expects consolidated net sales growth of nearly 5.5% for fiscal 2023. Excluding divestitures, the metric is likely to grow roughly 6.5%.

Walmart expects currency headwinds of nearly $4.1 billion in the fiscal. Management earlier anticipated consolidated net sales growth of nearly 4.5% at cc. Excluding divestitures, the metric was expected to grow nearly 5.5%. U.S. comp sales, excluding fuel, are likely to be roughly 4% now compared with the 4% growth expected before.  

Management now expects the consolidated adjusted operating income to decline 6.5-7.5%. The metric was earlier expected to decline 9-11%. Excluding divestitures, management expects the consolidated adjusted operating income to decline 5.5-6.5% now compared with the prior projection of an 8% to 10% decline. Management envisions earnings per share (EPS) to decline 6-7% in fiscal 2023 compared with the 9% to 11% decline expected before. Excluding divestitures, the EPS is expected to fall by 5-6% compared with the earlier view of an 8% to 10% decline.

For the fourth quarter of fiscal 2023, Walmart expects consolidated net sales growth of nearly 3%, including currency headwinds of about $1.3 billion. Comp sales growth at Walmart U.S. (excluding fuel) is likely to be 3%. The consolidated operating income growth is expected between a decline of 1% to an increase of 1%. The adjusted EPS is likely to decline 3-5%.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Walmart has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 B. 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. Notably, Walmart has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.