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Will Wal-Mart's (WMT) Earnings Surpass Estimates in Q2?
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We expect Wal-Mart Stores Inc. (WMT - Free Report) to beat expectations when it reports fiscal second-quarter 2017 results before the opening bell on Aug 18.
Last quarter, this retail giant posted a positive earnings surprise of 11.36%. We note that the company has posted positive earnings surprises in three of the last four quarters and a negative surprise in the remaining quarter, translating to an average positive surprise of 4.01%.
Let’s see how things are shaping up prior to this announcement.
Our proven model shows that Wal-Mart is likely to beat earnings this quarter because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.98%. This is meaningful and a leading indicator of a likely positive earnings surprise.
Zacks Rank: Wal-Mart carries a Zacks Rank #2 (Buy), which when combined with a +0.98% ESP makes us confident about an earnings beat.
Note that stocks with a Zacks Rank #1 (Strong Buy), #2 or #3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.
What is Driving the Better-Than-Expected Earnings?
Wal-Mart has been making efforts to understand the evolving needs of its customers to regain their confidence, and thus boost sales. It has delivered positive comps in the U.S. in the last seven quarters. Lower fuel prices aided sales as it eased consumers’ spending power. E-commerce has also contributed to the company’s sales. The company expects the trend of positive comps at Wal-Mart U.S. to continue in the soon-to-be reported quarter.
Wal-Mart expects U.S. comp sales growth of around 1% for the 13-week period ending Jul 29 compared with 1.5% comps growth last year. Sam’s Club comp sales, without the impact of fuel sales, are expected to be slightly positive compared with 1.3% growth last year.
Wal-Mart is also making huge investments in e-commerce initiatives to compete with the biggest online retailer Amazon.com (AMZN - Free Report) and to improve customer service. The company has recently sold its Chinese e-commerce business Yihaodian to local retailer JD.com to expand its reach in China.
The Bentonville, AR-based company is also paying higher wages to its workers and training them to improve its stores performance. However, these initiatives have increased expenses for the company. This along with unfavorable currency will take a toll on earnings.
In the second quarter of fiscal 2017, earnings are expected in a range of 95 cents to $1.08 per share, compared with the prior-year quarter’s earnings of $1.08 per share.
Other Stocks to Consider
Some other stocks in the broader retail sector that have both a positive earnings ESP and a favorable Zacks Rank are:
Lowe's Companies, Inc. (LOW - Free Report) , with an Earnings ESP of +2.13% and a Zacks Rank #2 .
The Children's Place, Inc. (PLCE - Free Report) , with an Earnings ESP of +25.00% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
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Will Wal-Mart's (WMT) Earnings Surpass Estimates in Q2?
We expect Wal-Mart Stores Inc. (WMT - Free Report) to beat expectations when it reports fiscal second-quarter 2017 results before the opening bell on Aug 18.
Last quarter, this retail giant posted a positive earnings surprise of 11.36%. We note that the company has posted positive earnings surprises in three of the last four quarters and a negative surprise in the remaining quarter, translating to an average positive surprise of 4.01%.
Let’s see how things are shaping up prior to this announcement.
WAL-MART STORES Price and EPS Surprise
WAL-MART STORES Price and EPS Surprise | WAL-MART STORES Quote
Why a Likely Positive Surprise?
Our proven model shows that Wal-Mart is likely to beat earnings this quarter because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +0.98%. This is meaningful and a leading indicator of a likely positive earnings surprise.
Zacks Rank: Wal-Mart carries a Zacks Rank #2 (Buy), which when combined with a +0.98% ESP makes us confident about an earnings beat.
Note that stocks with a Zacks Rank #1 (Strong Buy), #2 or #3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.
What is Driving the Better-Than-Expected Earnings?
Wal-Mart has been making efforts to understand the evolving needs of its customers to regain their confidence, and thus boost sales. It has delivered positive comps in the U.S. in the last seven quarters. Lower fuel prices aided sales as it eased consumers’ spending power. E-commerce has also contributed to the company’s sales. The company expects the trend of positive comps at Wal-Mart U.S. to continue in the soon-to-be reported quarter.
Wal-Mart expects U.S. comp sales growth of around 1% for the 13-week period ending Jul 29 compared with 1.5% comps growth last year. Sam’s Club comp sales, without the impact of fuel sales, are expected to be slightly positive compared with 1.3% growth last year.
Wal-Mart is also making huge investments in e-commerce initiatives to compete with the biggest online retailer Amazon.com (AMZN - Free Report) and to improve customer service. The company has recently sold its Chinese e-commerce business Yihaodian to local retailer JD.com to expand its reach in China.
The Bentonville, AR-based company is also paying higher wages to its workers and training them to improve its stores performance. However, these initiatives have increased expenses for the company. This along with unfavorable currency will take a toll on earnings.
In the second quarter of fiscal 2017, earnings are expected in a range of 95 cents to $1.08 per share, compared with the prior-year quarter’s earnings of $1.08 per share.
Other Stocks to Consider
Some other stocks in the broader retail sector that have both a positive earnings ESP and a favorable Zacks Rank are:
Lowe's Companies, Inc. (LOW - Free Report) , with an Earnings ESP of +2.13% and a Zacks Rank #2 .
The Children's Place, Inc. (PLCE - Free Report) , with an Earnings ESP of +25.00% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>