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How to Play Walmart (WMT) Ahead of Its Q1 Earnings Release
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With a chunk of the earnings season behind us, the spotlight remains on the retail sector. While major retailers are lined up for their quarterly releases this month, the focus currently lies on the omnichannel behemoth, Walmart Inc. (WMT - Free Report) , which is all set to release first-quarter fiscal 2025 earnings results before the opening bell on May 16.
We believe that it’s a good time for investors to assess both the potential advantages and risks linked to investing in this retail powerhouse. While Walmart shows promise due to its strong omnichannel strategy, diverse operations and significant market position, there are also inherent uncertainties that come with investing in this supermarket giant.
Analysts' expectations for WMT’s upcoming release paint quite a bright picture. The Zacks Consensus Estimate for first-quarter revenues stands at $159.2 billion, which suggests 4.5% growth from the figure reported in the year-ago period. The consensus estimate for earnings per share has remained unchanged at 52 cents over the past 30 days, which indicates a jump of 6.1% from the year-ago period earnings of 49 cents.
It is also worth noting that leading up to its upcoming release, Walmart has made headlines by announcing job cuts and requesting remote employees to transition back to office spaces, per a media report. This move aligns with the company's ongoing efforts to streamline operations, as it aims for approximately 65% of its stores to be automated by the end of fiscal 2026.
All said, the decision to invest in Walmart ahead of its quarterly earnings release demands a thoughtful evaluation of both potential rewards and inherent risks.
Walmart stands out for its strong position, benefiting from a highly diversified business across various segments, markets and channels. The company has been benefiting from an increase in both in-store and digital channel traffic, reflecting its adept navigation of the evolving retail landscape. Walmart's commitment to innovation and adaptability, particularly in the e-commerce space, has been a major driver. Gains from higher-margin ventures, such as advertising, are also noteworthy.
The focus on enhancing its physical store fleet has been instrumental, serving customers directly while also supporting a significant portion of e-commerce sales. Store remodeling initiatives have helped upgrade stores with advanced in-store and digital innovations. Concurrently, Walmart has strengthened its e-commerce operations through acquisitions, partnerships, and improved payment and delivery systems, exemplified by services like Express On-Demand Early Morning Delivery, the Spark Driver platform, investments in DroneUp and the Walmart+ membership program.
However, challenges stemming from market saturation and increased competition from online retailers may temper Walmart's growth trajectory. The company's extensive presence across the United States has led to market saturation in many areas, particularly urban and densely populated regions. Additionally, stiff competition from e-commerce giant Amazon has intensified competition in the marketplace.
Image Source: Zacks Investment Research
Valuation Picture & Zacks Model
Walmart exhibits a forward 12-month price-to-earnings ratio of 25.07, which is above the Retail – Supermarkets industry's average of 23.22 but below its five-year high of 27.24. While the current valuation is above the industry average, the gap from its historical high indicates potential room for growth. Investors may view this as an opportunity, considering Walmart’s strong market position and excellent growth prospects.
Recent market movements show Walmart’s shares rising by 7.1% in the last three months compared with the industry's growth of 8%. Currently trading at $60.41, the company is poised to potentially surpass its 52-week high of $61.66, as our proven model predicts that Walmart is likely to beat earnings estimates in the upcoming release.
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, which is the case here. Walmart has an Earnings ESP of +1.65% and carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Bright Horizons Ahead
A look at the road ahead for Walmart reveals a rather positive picture. The Zacks Consensus Estimate for sales for the current and next fiscal year stands at $672.6 billion and $699.6 billion, which suggests 3.8% and roughly 4% year-over-year growth, respectively. The consensus estimate for earnings per share is pegged at $2.36 and $2.55 for the current and next fiscal years, which calls for an increase of 6.3% and 8.1%, respectively.
Other Stocks With the Favorable Combination
Here are three other companies worth considering, as our model shows that these also have the correct combination to beat on earnings this time:
The TJX Companies (TJX - Free Report) currently has an Earnings ESP of +2.50% and a Zacks Rank #2. TJX is likely to register top and bottom-line growth when it reports first-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $12.5 billion, which indicates 5.8% growth from that reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TJX’s fiscal first-quarter earnings is pegged at 87 cents, which implies 14.5% growth from the year-ago quarter's actuals. The consensus mark has been unchanged in the past 30 days. TJX has a trailing four-quarter earnings surprise of 6.3%, on average.
Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) currently has an Earnings ESP of +3.08% and a Zacks Rank of 3. The company is likely to register top-and-bottom-line increases when it posts first-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for Ollie's Bargain’s quarterly revenues is pegged at $503.8 million, which calls for growth of 9.7% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Ollie's Bargain’s quarterly earnings of 65 cents suggests a rise of 32.7% from the year-ago quarter’s levels. OLLI has a trailing four-quarter earnings surprise of 7.3%, on average.
Ross Stores (ROST - Free Report) currently has an Earnings ESP of +3.24% and a Zacks Rank #3. The company is likely to register top-and-bottom-line growth when it reports first-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $4.82 million, which indicates 7.3% growth from that reported in the prior-year quarter.
The Zacks Consensus Estimate for Ross Stores’ fiscal first-quarter earnings is pegged at $1.34 per share, which calls for 22.9% growth from that reported in the year-ago quarter. The consensus mark has been unchanged in the past 30 days. ROST has a trailing four-quarter earnings surprise of 9.1%, on average.
Image: Bigstock
How to Play Walmart (WMT) Ahead of Its Q1 Earnings Release
With a chunk of the earnings season behind us, the spotlight remains on the retail sector. While major retailers are lined up for their quarterly releases this month, the focus currently lies on the omnichannel behemoth, Walmart Inc. (WMT - Free Report) , which is all set to release first-quarter fiscal 2025 earnings results before the opening bell on May 16.
We believe that it’s a good time for investors to assess both the potential advantages and risks linked to investing in this retail powerhouse. While Walmart shows promise due to its strong omnichannel strategy, diverse operations and significant market position, there are also inherent uncertainties that come with investing in this supermarket giant.
Analysts' expectations for WMT’s upcoming release paint quite a bright picture. The Zacks Consensus Estimate for first-quarter revenues stands at $159.2 billion, which suggests 4.5% growth from the figure reported in the year-ago period. The consensus estimate for earnings per share has remained unchanged at 52 cents over the past 30 days, which indicates a jump of 6.1% from the year-ago period earnings of 49 cents.
It is also worth noting that leading up to its upcoming release, Walmart has made headlines by announcing job cuts and requesting remote employees to transition back to office spaces, per a media report. This move aligns with the company's ongoing efforts to streamline operations, as it aims for approximately 65% of its stores to be automated by the end of fiscal 2026.
All said, the decision to invest in Walmart ahead of its quarterly earnings release demands a thoughtful evaluation of both potential rewards and inherent risks.
Walmart Inc. Price, Consensus and EPS Surprise
Walmart Inc. price-consensus-eps-surprise-chart | Walmart Inc. Quote
Weighing Prospects and Risks
Walmart stands out for its strong position, benefiting from a highly diversified business across various segments, markets and channels. The company has been benefiting from an increase in both in-store and digital channel traffic, reflecting its adept navigation of the evolving retail landscape. Walmart's commitment to innovation and adaptability, particularly in the e-commerce space, has been a major driver. Gains from higher-margin ventures, such as advertising, are also noteworthy.
The focus on enhancing its physical store fleet has been instrumental, serving customers directly while also supporting a significant portion of e-commerce sales. Store remodeling initiatives have helped upgrade stores with advanced in-store and digital innovations. Concurrently, Walmart has strengthened its e-commerce operations through acquisitions, partnerships, and improved payment and delivery systems, exemplified by services like Express On-Demand Early Morning Delivery, the Spark Driver platform, investments in DroneUp and the Walmart+ membership program.
However, challenges stemming from market saturation and increased competition from online retailers may temper Walmart's growth trajectory. The company's extensive presence across the United States has led to market saturation in many areas, particularly urban and densely populated regions. Additionally, stiff competition from e-commerce giant Amazon has intensified competition in the marketplace.
Image Source: Zacks Investment Research
Valuation Picture & Zacks Model
Walmart exhibits a forward 12-month price-to-earnings ratio of 25.07, which is above the Retail – Supermarkets industry's average of 23.22 but below its five-year high of 27.24. While the current valuation is above the industry average, the gap from its historical high indicates potential room for growth. Investors may view this as an opportunity, considering Walmart’s strong market position and excellent growth prospects.
Recent market movements show Walmart’s shares rising by 7.1% in the last three months compared with the industry's growth of 8%. Currently trading at $60.41, the company is poised to potentially surpass its 52-week high of $61.66, as our proven model predicts that Walmart is likely to beat earnings estimates in the upcoming release.
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, which is the case here. Walmart has an Earnings ESP of +1.65% and carries a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Bright Horizons Ahead
A look at the road ahead for Walmart reveals a rather positive picture. The Zacks Consensus Estimate for sales for the current and next fiscal year stands at $672.6 billion and $699.6 billion, which suggests 3.8% and roughly 4% year-over-year growth, respectively. The consensus estimate for earnings per share is pegged at $2.36 and $2.55 for the current and next fiscal years, which calls for an increase of 6.3% and 8.1%, respectively.
Other Stocks With the Favorable Combination
Here are three other companies worth considering, as our model shows that these also have the correct combination to beat on earnings this time:
The TJX Companies (TJX - Free Report) currently has an Earnings ESP of +2.50% and a Zacks Rank #2. TJX is likely to register top and bottom-line growth when it reports first-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $12.5 billion, which indicates 5.8% growth from that reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TJX’s fiscal first-quarter earnings is pegged at 87 cents, which implies 14.5% growth from the year-ago quarter's actuals. The consensus mark has been unchanged in the past 30 days. TJX has a trailing four-quarter earnings surprise of 6.3%, on average.
Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) currently has an Earnings ESP of +3.08% and a Zacks Rank of 3. The company is likely to register top-and-bottom-line increases when it posts first-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for Ollie's Bargain’s quarterly revenues is pegged at $503.8 million, which calls for growth of 9.7% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Ollie's Bargain’s quarterly earnings of 65 cents suggests a rise of 32.7% from the year-ago quarter’s levels. OLLI has a trailing four-quarter earnings surprise of 7.3%, on average.
Ross Stores (ROST - Free Report) currently has an Earnings ESP of +3.24% and a Zacks Rank #3. The company is likely to register top-and-bottom-line growth when it reports first-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $4.82 million, which indicates 7.3% growth from that reported in the prior-year quarter.
The Zacks Consensus Estimate for Ross Stores’ fiscal first-quarter earnings is pegged at $1.34 per share, which calls for 22.9% growth from that reported in the year-ago quarter. The consensus mark has been unchanged in the past 30 days. ROST has a trailing four-quarter earnings surprise of 9.1%, on average.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.