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Buy Underperforming Walmart Stock Before Q4 Earnings?

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Benjamin Rains
·3 min read
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Walmart WMT shares have slipped over 4% in the last three months to lag the S&P 500’s 10% climb and rival Target’s TGT 17% jump. Luckily, WMT will have a chance to possibly breakout of its slump amid what has been a strong fourth quarter earnings season, with it set to release its Q4 fiscal 2021 financial results on Thursday, February 18.

E-Commerce & Coronavirus-Shopping

Walmart now has multiple delivery and pick up options and its e-commerce platforms are more robust than ever, as it continues to invest in the future of the industry where consumers demand as many options as possible. WMT also in mid-September launched its subscription service to help it further challenge Amazon AMZN.

The service, dubbed Walmart+, costs $98 a year vs. Amazon Prime’s $119, and offers unlimited free deliveries. Members also get discounts on fuel and access to new-age in-store checkout offerings.

WMT has also expanded its consumer base and diversified its portfolio as smaller brands thrive online. This includes teaming up with secondhand e-commerce clothing firm ThredUp, partnering with Shopify SHOP to bring more small businesses to its own third-party marketplace, and more. And Walmart has spent to beef up its digital advertising business.

These efforts have helped Walmart thrive during the pandemic shopping environment that likely helped speed up the adoption of e-commerce. With this in mind, WMT’s Q3 comps popped 6.4%, with e-commerce sales up 79%, down from 9.3% and 97% in Q2.

Zacks estimates call for Walmart’s Q4 comparable sales to pop 5.2%, with its adjusted EPS set to climb 6.5% to $1.47 a share. Looking ahead, its first quarter sales are projected to dip slightly below the hard-to-compared Q1 that included the initial lockdown spending spree. This could prove to be the theme for WMT and some other retailers this year, as it will be nearly impossible to match its coronavirus growth going forward.

Bottom Line

WMT has crushed our adjusted earnings estimates in the last two quarters and the overall Q4 earnings season has been strong, which could be a good sign for Walmart and the other retailers that report their earnings soon.

Walmart is a Zacks Rank #3 (Hold) right now, with a 1.5% dividend yield that tops the 10-year U.S. Treasury. Still, it could be hard to impress Wall Street even though it has underperformed the market. Therefore, investors might want to wait for Walmart’s guidance before considering the retail powerhouse.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

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