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Should You Buy Walmart (WMT) Stock Ahead of Earnings?
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Shares of Walmart (WMT - Free Report) ticked down 0.7% on Wednesday, the last full day of trading before its upcoming earnings release. This doesn’t tell us much, but we can take a look at WMT’s quarterly estimates and fundamentals to see what’s really going on.
Walmart stock has underperformed recently, gaining 11.1% over the last year but shedding about 9% on a year-to-date basis. WMT has aggressively boosted e-commerce spending, seeking to expand overall operations, with a focus in online grocery delivery. The company is also improving its international unit, having made headlines when it announced the purchase of a majority stake in Indian e-commerce player Flipkart.
Walmart announced a five-year strategic agreement with Microsoft (MSFT - Free Report) in mid-July. The extended collaboration will bolster Walmart’s digital capabilities with Microsoft’s advanced cloud data solutions. The agreement is expected to help reduce operational costs and redundancies, and is the latest in a series of partnerships that WMT has inked to continue its fight against key rival Amazon (AMZN - Free Report) .
But while these initiatives hold promise for Walmart, the increased investments and competitive pricing strategy have hurt margins, leading to the firm’s recent underperformance. Still, the short-term hit is outweighed by the added value that the moves are expected to generate for the storied retail giant.
There is plenty of recent Walmart-related news for investors to consider, but what can we expect from the company’s latest report? Let’s take a closer look.
Latest Outlook & Valuation
According to our latest Zacks Consensus Estimates, Walmart is expected to report earnings of $1.21 per share and revenue of $125.64 billion. These results would represent year-over-year growth of 12.04% and 1.85%, respectively.
Of course, top and bottom line growth estimates are just two of the many things investors will be concerned with when WMT reports its quarterly financial results. We can also turn to our exclusive non-financial metrics consensus estimate file to help prepare.
The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
According to these consensus estimates, Walmart is projected to see a 2.1% year-over-year boost in comparable store sales across its US locations. A beat here would be a promising sign, and mark the third-consecutive quarter in which the firm does so.
WMT is also expected to have hit 6,389 overall total international locations in the quarter, marking 2.2% growth from the year-ago period and maintaining a positive sequential trend. Moreover, international set sales are slated to reach $29.40 billion, representing 3.8%, or $1.07 billion growth over the year before.
Furthermore, heading into Thursday, Walmart was trading with a Forward P/E of 18.6x, which marks a discount compared to the broader “Retail-Wholesale” market average of 24.1x.
Earnings ESP Whispers
Investors will want to understand what chance Walmart has to surprise investors with better-than-expected earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.
This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
WMT is currently a Zacks Rank #3 (Hold) and sports an Earnings ESP of 0.97%. In other words, our model suggests that WMT could be poised to top estimates.
Surprise History
WMT’s earnings surprise history and the effect that these surprises have had on its share prices are two other important factors to consider ahead of its earnings report.
We can see that WMT has posted mostly solid earnings results, topping quarterly estimates in 14 of the last 16 quarters. But these beats do not always lead to positive momentum following WMT’s quarterly release.
We judge the price effect of earnings surprises by comparing the closing price of the stock two days before the report and two days after the report. Walmart’s stock has turned negative in five out of these last eight windows.
Walmart is scheduled to report its latest quarterly earnings Thursday morning.
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Should You Buy Walmart (WMT) Stock Ahead of Earnings?
Shares of Walmart (WMT - Free Report) ticked down 0.7% on Wednesday, the last full day of trading before its upcoming earnings release. This doesn’t tell us much, but we can take a look at WMT’s quarterly estimates and fundamentals to see what’s really going on.
Walmart stock has underperformed recently, gaining 11.1% over the last year but shedding about 9% on a year-to-date basis. WMT has aggressively boosted e-commerce spending, seeking to expand overall operations, with a focus in online grocery delivery. The company is also improving its international unit, having made headlines when it announced the purchase of a majority stake in Indian e-commerce player Flipkart.
Walmart announced a five-year strategic agreement with Microsoft (MSFT - Free Report) in mid-July. The extended collaboration will bolster Walmart’s digital capabilities with Microsoft’s advanced cloud data solutions. The agreement is expected to help reduce operational costs and redundancies, and is the latest in a series of partnerships that WMT has inked to continue its fight against key rival Amazon (AMZN - Free Report) .
But while these initiatives hold promise for Walmart, the increased investments and competitive pricing strategy have hurt margins, leading to the firm’s recent underperformance. Still, the short-term hit is outweighed by the added value that the moves are expected to generate for the storied retail giant.
There is plenty of recent Walmart-related news for investors to consider, but what can we expect from the company’s latest report? Let’s take a closer look.
Latest Outlook & Valuation
According to our latest Zacks Consensus Estimates, Walmart is expected to report earnings of $1.21 per share and revenue of $125.64 billion. These results would represent year-over-year growth of 12.04% and 1.85%, respectively.
Of course, top and bottom line growth estimates are just two of the many things investors will be concerned with when WMT reports its quarterly financial results. We can also turn to our exclusive non-financial metrics consensus estimate file to help prepare.
The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
According to these consensus estimates, Walmart is projected to see a 2.1% year-over-year boost in comparable store sales across its US locations. A beat here would be a promising sign, and mark the third-consecutive quarter in which the firm does so.
WMT is also expected to have hit 6,389 overall total international locations in the quarter, marking 2.2% growth from the year-ago period and maintaining a positive sequential trend. Moreover, international set sales are slated to reach $29.40 billion, representing 3.8%, or $1.07 billion growth over the year before.
Furthermore, heading into Thursday, Walmart was trading with a Forward P/E of 18.6x, which marks a discount compared to the broader “Retail-Wholesale” market average of 24.1x.
Earnings ESP Whispers
Investors will want to understand what chance Walmart has to surprise investors with better-than-expected earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.
This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
WMT is currently a Zacks Rank #3 (Hold) and sports an Earnings ESP of 0.97%. In other words, our model suggests that WMT could be poised to top estimates.
Surprise History
WMT’s earnings surprise history and the effect that these surprises have had on its share prices are two other important factors to consider ahead of its earnings report.
We can see that WMT has posted mostly solid earnings results, topping quarterly estimates in 14 of the last 16 quarters. But these beats do not always lead to positive momentum following WMT’s quarterly release.
We judge the price effect of earnings surprises by comparing the closing price of the stock two days before the report and two days after the report. Walmart’s stock has turned negative in five out of these last eight windows.
Walmart is scheduled to report its latest quarterly earnings Thursday morning.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>