Marvin Samuel Tolentino Pineda
Walmart (NYSE:WMT), which will report earnings on August 15, is up 29% year-to-date and is expected to move higher. Analyst consensus forecasts Walmart (WMT) revenue of $167.3 billion, EPS of $0.65, and U.S. comparable sales growth 3.3%. The general view is that Wal-Mart (WMTDefensive stock picks will continue to benefit if tense trading in global markets persists, but the entire retail industry is keeping a close eye on the Bentonville retail giant’s pulse on U.S. consumers.
Morgan Stanley expects Walmart ( WMT ) to post another huge quarter by showing off its market share leadership amid weak consumption. Analyst Simeon Gutman believes that if Walmart’s (WMT) sales are in line with comparable expectations, the stock’s performance will be acceptable, especially as the rest of the retail industry slows. “Given slow retail sales data in July, rising risks of consumer slowdown and upcoming elections in the second half of 2024, we believe it should be acceptable to retain guidance amid these uncertainties,” he stressed.
Oppenheimer analyst Rupesh Parikh is slightly more cautious on Walmart’s (WMT) print. Parikh and his team are taking a more dovish view of the setup after significant recent outperformance and a potentially aggressive third-quarter revenue forecast. “At this point, and against the current backdrop of subdued inflation, we believe management is likely to increase fiscal 2024 (January 2025) EPS guidance, but at the expense of implicit full-year revenue constant currency (cc) growth On the high end or a little above the 3-4% range,” Parikh noted. Oppenheimer’s view is that investors should be prepared to take advantage of profit-taking opportunities rather than looking for positive catalysts in upcoming print releases. Walmart (WMT) remains Oppenheimer’s top pick.
Seeking Alpha analyst Uttam Dey believes that the combination of higher-margin digital advertising revenue and membership growth should boost Walmart’s (WMT) profit margins. Dey believes that Wal-Mart’s (WMT) operating income compound annual growth rate can reach 9.6%, and its profit margins will increase by about 20 basis points per year on average. However, with expectations clearly on the higher side and the market likely factoring in Walmart’s (WMT) over-and-over guidance, Day believes the stock could remain range-bound for a few months if Walmart’s (WMT) guidance is conservative.
On the earnings call, investors should hear Walmart (WMT) discuss margin headwinds for the remainder of the year, as well as details on its U.S. sales mix from general merchandise to groceries and health and wellness. Investors will also be watching to see whether Walmart ( WM ) can match strong growth in its global advertising business of more than 30% in the first quarter.
Options trading means Walmart (WMT) shares rose 5% following its second-quarter earnings report. Notably, the stock gained 7% after the first-quarter report was abandoned. The retailers with the highest correlation to trading with Walmart (WMT) following its earnings report are BJ’s Wholesale Club (BJ), Costco (COST), Ollie’s Bargain Outlet Holdings (OLLI) and Best Buy (BBY). Analysts also named grocery store stocks Albertsons Companies (ACI), Kroger (K) and Sprouts Farmers Market (SFM) as three names that could react to Walmart’s (WMT) print. ETFs with the highest exposure to Walmart (WMT) include Consumer Staples Select Sector SPDR Fund ETF (XLP), Vanguard Consumer Staples Index Fund ETF (VDC), VanEck Retail ETF (RTH) and iShares US Consumer Focus ETF (IEDI) Focus ETF (IEDI).
