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Factors Setting the Tone for Walmart's (WMT) Q1 Earnings

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Walmart Inc. (WMT - Free Report) is slated to release first-quarter fiscal 2021 results on May 19. The supermarket giant delivered a negative earnings surprise of 3.5% in the last reported quarter. However, the company beat estimates in three quarters preceding the last one, the four-quarter average being 4.5%.

The Zacks Consensus Estimate for first-quarter earnings has gone down a penny in the past seven days to $1.14 per share. This suggests an increase of 0.9% from the figure reported in the year-ago quarter. Further, the consensus mark for revenues stands at $129.2 billion, indicating a rise of 4.3% from the year-ago period’s reported figure.

Walmart Inc Price and EPS Surprise

Walmart Inc Price and EPS Surprise

Walmart Inc price-eps-surprise | Walmart Inc Quote

Key Factors to Note

Walmart has been gaining from increased traffic, stemming from burgeoning demand for essential items amid coronavirus. Well, COVID-19 and the resultant social distancing have led consumers to stay indoors and just move out for essentials. This has spiked up the demand for toilet papers, disinfectants, masks, gloves, packaged water, infant supply medicines, groceries and related staples. As a result of the surging demand, retail behemoths like Walmart have to restock their shelves faster than usual. Also, its robust e-commerce platform, especially grocery delivery, has been playing a key role in this crisis situation. 

In fact, the company recently unveiled a new service — Express Delivery — through which many items from Walmart’s stores will be delivered to customers in less than two hours. Customers can order more than 160,000 products from Walmart’s food, consumables and general merchandise categories through Express Delivery. Such initiatives are likely to work well for Walmart and help it serve better amid the coronavirus-led lockdown.

To cater to the rising demand and traffic, the company also appointed 200,000 workers at its stores, clubs, and distribution and fulfillment centers. Further, it has been paying special cash bonuses to its hourly workers. Apart from this, the company is making concerted efforts to ensure employees’ safety. Incidentally, the company has implemented daily health screens and temperature checks, installed sneeze guards, offered masks and gloves, restricted the number of in-store customers and implemented sanitizing measures, among others. However, industry experts have pointed out that investment in pay and benefits for employees, the shift in channel mix toward digital fulfillment and transition toward lower-margin categories are threats to margins. In fact, Walmart has been seeing soft gross margin for a while now due to compelling pricing as well as growing e-commerce mix.

What the Zacks Model Unveils

Our proven model does not conclusively predict 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. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Walmart carries a Zacks Rank #3 and an Earnings ESP of -3.83%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combinations

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

Kroger (KR - Free Report) has an Earnings ESP of +8.48% and a Zacks Rank #2.

Lowe’s Companies (LOW - Free Report) has an Earnings ESP of +4.06% and a Zacks Rank #3.

Big Lots (BIG - Free Report) has an Earnings ESP of +18.72% and a Zacks Rank #3.

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Walmart Inc. (WMT) - free report >>

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The Kroger Co. (KR) - free report >>