Walmart (WMT - Free Report) stock is up over 4% in 2020, against the S&P 500’s 9% downturn, as investors look for stocks that seem immune to the broader coronavirus economic downturn. So the question is should investors think about buying Walmart stock before it reports its Q1 fiscal 2021 financial results on Tuesday, May 19?
Walmart’s E-Commerce Business
Walmart has rolled out more delivery and pick up options, alongside a beefed-up overall digital business. The company made these moves in order to compete in a quickly evolving space that continues to use Amazon (AMZN - Free Report) as the barometer for e-commerce success. Fellow powers such as Target (TGT - Free Report) and Costco (COST - Free Report) have made similar moves to grow in the new retail age.
Walmart closed last year with roughly 3,200 grocery pickup locations in the U.S. and over 1,600 delivery locations. The company also launched during fiscal 2020 free NextDay delivery from Walmart.com and a grocery delivery membership option called “Delivery Unlimited.” Plus, WMT is experimenting with an in-home delivery offering, autonomous delivery, and more.
These initiatives helped the Bentonville, Arkansas-based company’s U.S. e-commerce sales jump 37% last year, which came on top of fiscal 2019’s 40% e-commerce revenue growth. Meanwhile, its total revenue popped 1.9%, with U.S. comparable sales up 2.8%.
WMT then on April 30 announced what it calls Express Delivery, to help expand its reach during the coronavirus. The new service “delivers more items from the store than ever before to customers' doors in less than two hours.” Investors should note that the service will cost “$10 on top of the existing delivery charge,” while its Delivery Unlimited customers will “simply pay a $10 fee per Express Delivery.”
Walmart also said it “accelerated the development of the service in the wake of the Coronavirus pandemic, piloting Express Delivery in 100 stores since mid-April. The service will expand to nearly 1,000 stores in early May and will be available in nearly 2,000 total stores in the following weeks.”
Before we look ahead, let’s quickly review some of Walmart’s other fundamentals. WMT shares have lagged the market’s comeback since its March 23 lows, up roughly 8%. That said, Walmart didn’t have as much room to climb since it didn’t really selloff. In fact, the stock is still up over 4% in 2020 and 24% in the last 12 months.
WMT closed regular trading Monday at $123.67 a share. This puts it about 7% off its 52-week highs and could give it more room to run if its Q1 results or guidance impress. Walmart is also currently trading at a slight discount compared to Target in terms of forward 12-months sales estimates.
The retailer last quarter upped its dividend by 2% and its yield currently comes in at 1.75%. This crushes the 10-year U.S. Treasury’s 0.71%. Walmart is also part of an industry that rests in the top 12% of our more than 250 Zacks industries and holds “B” grades for both Growth and Value in our Style Scores system.
Our current Zacks estimates call for Walmart’s Q1 fiscal 2021 revenue to jump 4.3% from the year-ago period to $129.24 billion. WMT’s Q2 sales are then projected to jump 3%. Both of these estimates would mark the strongest quarterly growth since its revenue popped 3.8% in the second quarter of fiscal 2019.
Meanwhile, its fiscal 2021 sales are projected to climb 3.5% to hit $542.32 billion. Investors should be pleased to note that this would represent WMT’s best full-year revenue growth since fiscal 2013, and easily top 2020’s 1.8% and 2019’s 2.8%.
The bottom end of the income statement looks less impressive, as it spends on its future and deals with the coronavirus. That said, its adjusted Q1 earnings are still expected to pop 1.8%. On top of that, its current $1.15 a share estimate has remained unchanged over the last 60 days, which is a good sign considering the overall earnings picture for the S&P 500.
Playing a stock for near-term gains around earnings is difficult, especially during these unprecedented times. Yet, longer-term investors might want to consider buying Walmart stock, which is currently a Zacks Rank #3 (Hold), because it’s a safe retail powerhouse that pays a dividend and is prepared to expand its e-commerce business.
WMT is also attractive at the moment for its ability to grow during the coronavirus.
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