Walmart (NYSE: WMT), the world’s largest retailer, operating discount stores, supercenters, neighborhood markets, and Sam’s Club warehouses, is scheduled to report its fiscal second-quarter results on Tuesday, August 17.
Retail stocks have done well in 2021, with the SPDR S&P Retail ETF (XRT) up more than 50% this year. Government stimulus and the enhanced child tax credit have put more money in consumers’ pockets, while many other entertainment options, like travel and sporting events, remain limited.
Investors are closely watching stocks across the consumer sector to see how the resurgence in Covid cases might impact spending.
Walmart (WMT) has been a major pandemic winner, staying open as an essential retailer during the first phase of the Covid crisis. It later used its deep pockets to handle the surge in online orders and introduced new options like a curbside pickup. Cautious shoppers also consolidated their trips, often favoring single stops at the big-box retailers.
Analysts are upbeat about Walmart.
Walmart was able to deliver upbeat first-quarter earnings reports in mid-May. The second-quarter reports for Walmart come Tuesday.
Analysts expect Walmart to earn $1.57 a share on revenue of $136.78 billion, compared with $1.69 in the last quarter and $1.56 last year.
Wall Street is enthusiastic about this stock, according to FactSet.Of the 36 analysts tracking Walmart, 72% rate the stock at Buy and 19% at Hold, with three bearish calls.
1) Revenues expected to be ahead of consensus estimates:
Trefis estimates Walmart’s Q2 2022 revenues to be around $140.2 Bil, 3% ahead of the consensus estimate of $135.9 Bil. Walmart’s fiscal first-quarter revenue grew by 2.7% year-over-year (y-o-y) to $138.3 billion, driven by federal stimulus measures and pent-up demand across both discretionary and consumer staples niches. While customer traffic at stores dropped 3% in Q1, it was a big improvement over a 10% fall in Q4.
2) EPS likely to be ahead of consensus estimates:
WMT’s Q2 2022 earnings per share are expected to be $1.58 per Trefis analysis, 3% above the consensus estimate of $1.54. The retailer’s EPS declined 30% y-o-y to 97 cents in fiscal Q1. It is worth mentioning that online services that have gained steam, such as curbside pickup, require additional labor – translating to higher labor costs. And, Walmart has not been passing these costs on to its customers, even as more take advantage of the convenience of shopping online.
3) Stock price estimate higher than the current market price:
With an EPS estimate of around $5.98 and a P/E multiple of 25.6x in fiscal 2022, Walmart’s valuation translates into a price of $153, which is 7% higher than the current market price.
Walmart Long (Buy)
Enter at: 150.48