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Buy Recently Sluggish Walmart (WMT) Stock Ahead of Q4 Earnings?

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Walmart (WMT - Free Report) shares have lagged the market in the last three months, down 4% against the S&P 500’s 9% climb. So, is it time to buy WMT stock with the retailer set to report its Q4 financial results before the market opens on Tuesday, February 18?

Walmart’s E-Commerce Push

The explosion of e-commerce has fueled the narrative around retail for years. And while Amazon (AMZN - Free Report) has driven many stores out of business, Walmart and fellow giants such as Target (TGT - Free Report) and Costco (COST - Free Report) have seriously beefed up their digital commerce offerings.

Walmart has expanded its e-commerce business and rolled out multiple delivery and curbside pickup offerings to meet growing consumer demand. Walmart closed the third quarter with more than 3,000 grocery pickup locations in the U.S. and over 1,400 same-day grocery delivery locations. The firm even launched its new “InHome Delivery” offering in three markets.

These initiatives helped the Bentonville, Arkansas-based company’s U.S. e-commerce sales soar 41%—which came on top of the year-ago period’s 43% e-commerce growth. Online grocery helped boost Walmart’s e-commerce growth and overall U.S. comp sales popped 3.2%. This pushed WMT’s streak to five years of quarterly sales gains.

On top of that, Walmart has now owned Flipkart, which is one of India’s largest e-commerce sites, for over a year. WMT has also purchased smaller digital-heavy retailers and niche higher-end companies such as Jet.com and Bonobos.

 

 

 

 

Other Fundamentals 

The phase-one trade deal between the U.S. and China earlier this year helped ease some worries. And Wall Street appears to have shaken off coronavirus fears with the Dow, the S&P 500, and the Nasdaq all at new highs, driven by better-than-expected earnings results from giants like Apple (AAPL - Free Report) and Amazon.

Last Friday’s jobs report was also strong and U.S. unemployment remains near 50-year lows. Looking back to the holiday season, which is key for Walmart, the National Retail Federation said that retail sales climbed 4.1%.

The nearby chart shows us that WMT stock is up 35% in the last five years to top its industry’s 24% climb. The last three years have been even better, with Walmart up 71%, against its industry’s 35% and the S&P’s 45%.

As we mentioned at the top, Walmart stock is down over 4% in the last three months and is flat in the past month. WMT closed regular trading Wednesday at $115.85 a share, down roughly 8% from its 52-week highs.

This could give the stock some room to run as it rests below its 50-day moving average. The retailer also currently pays an annualized dividend of $2.12 per share, for a 1.84% yield, which tops the 10-year U.S. Treasury’s current 1.63%.

Outlook

Looking ahead, our current Zacks estimates call for Walmart’s Q4 fiscal 2020 revenue to jump 2.7% to $142.48 billion. This would beat last quarter’s 2.5% and come on top of Q4 FY19’s 1.9% revenue growth.

WMT’s fiscal 2020 sales are projected to climb 2.2% higher, with 2021 expected to climb over 3.1% to $541.59 billion. These would both compare relatively well against 2019’s 2.8% and 2018’s 3% revenue expansion.

More specifically, Walmart’s quarterly same-store sales are expected to pop 2.6%. This would fall short of Q3’s 3.2% growth but it comes against the year-ago period’s harder to compare 4.2% comps jump. And its fiscal 2020 U.S. comp sales are expected to climb 3%, after they popped 3.6% last year.

Meanwhile, Walmart’s adjusted quarterly earnings are projected to climb 2.1% to $1.44 per share. The company’s fiscal-year EPS figure is set to pop 1.4%, with 2021 earnings expected to jump 4.4% higher.

Bottom Line

Walmart is currently a Zacks Rank #3 (Hold) and its valuation picture is somewhat stretched. And playing stocks around earnings can be risky.

With that said, Walmart does appear ready to grow in the e-commerce age and it is likely due for a comeback sometime soon.

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