Back to top

Image: Bigstock

Walmart (WMT) Q2 Earnings in Focus: Everything You Should Know

Read MoreHide Full Article

Walmart Inc. (WMT - Free Report) is likely to witness year-over-year declines in the top and bottom lines, when it reports second-quarter fiscal 2022 numbers on Aug 17, before market open. The Zacks Consensus Estimate for revenues is pegged at $135.9 billion, suggesting a dip of 1.4% from the prior-year quarter’s reported figure. The company had witnessed a revenue increase of 2.7% in the last reported quarter.

The Zacks Consensus Estimate for earnings has remained unchanged over the past 30 days at $1.53 per share, which indicates a 1.9% drop from the figure reported in the prior-year period. Markedly, the supermarket giant has a trailing four-quarter earnings surprise of 17.8%, on average. Walmart delivered an earnings surprise of 38.5% in the last reported quarter.

Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. price-consensus-eps-surprise-chart | Walmart Inc. Quote

Key Factors to Note

Walmart recently completed the divestiture of its businesses in Argentina, the U.K. and Japan.  We note that Walmart’s overall revenues in first-quarter fiscal 2022 were hurt to the tune of $4.2 billion by recent divestitures related to the Walmart International business. The recent divestitures hurt Walmart International segment sales by 4.2 million. Apart from these, pandemic-related government limitations in select regions affected results in the segment. Management, on its first-quarter earnings call, stated that for fiscal 2022, it expects a 20-25% constant currency decline in Walmart International net sales due to divestitures. This clearly raises concerns over the quarter under review.

Walmart’s SG&A expenses in the first quarter witnessed pressure from investments in higher wages, as well as technology in the United States. The company then said that it expects to keep witnessing an inflationary environment, related to cost of goods and wages. Apart from this, the company expects supply-chain hiccups, which, again, is a threat. In the second quarter, consolidated operating income is likely to have declined in the low- to mid-single-digit range, while the same is expected to have increased slightly on excluding divestitures. Earnings per share for the second quarter are anticipated to have decreased in low-single digits, while the same might have increased in low-single digits on excluding divestitures.

That said, Walmart has been benefiting from rising demand for essential items amid the pandemic-induced higher at-home consumption. Further, elevated stay-at-home trends are boosting e-commerce sales. On its first-quarter earnings call, management stated it expects the continuation of pent-up demand throughout 2021. Management is encouraged with the traffic trends and grocery market-share position. With more customers going out to shop in the United States, the company’s store environment is in good shape, while e-commerce also remains on the growth trajectory.

Walmart’s e-commerce business and omnichannel penetration have been growing all the more amid the pandemic-led social distancing.  In this regard, Walmart has been taking several e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems.  Apart from these, the big-box retailer has been undertaking several efforts to enhance merchandise assortments and has also been focused on store remodeling, to upgrade them with advanced in-store and digital innovation. These factors helped Walmart’s U.S. comp sales to increase for the 27th straight time in the last reported quarter. For the second quarter, the company anticipates comp sales (excluding fuel) in Walmart U.S. to have increased in low-single digits.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Walmart this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Walmart currently has a Zacks Rank #2 and an Earnings ESP of +0.05%.

Other Stocks With Favorable Combinations

Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.

Target (TGT - Free Report) has an Earnings ESP of +2.31% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ulta Beauty (ULTA - Free Report) has an Earnings ESP of +7.01% and a Zacks Rank #2.

Costco Wholesale (COST - Free Report) has an Earnings ESP of +0.44% and holds a Zacks Rank #3.

Published in