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Factors to Note as Walmart (WMT) Queues Up for Q1 Earnings

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·5 min read
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Walmart Inc. WMT is likely to witness a year-over-year decline in its top and bottom lines when it reports first-quarter fiscal 2023 earnings on May 17. The Zacks Consensus Estimate for revenues is pegged at $138.1 billion, suggesting a drop of 0.1% from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for earnings has remained unchanged over the past 30 days at $1.47 per share. This indicates a decrease of 13% from the figure reported in the prior-year period. Walmart has a trailing four-quarter earnings surprise of 14.7%, on average. This omnichannel retailer delivered an earnings surprise of 2% in the last reported quarter.

Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. Price, Consensus and EPS Surprise
Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. price-consensus-eps-surprise-chart | Walmart Inc. Quote

Key Factors to Consider

The industry is currently grappling with supply-chain bottlenecks and Walmart is not fully immune to these headwinds. The company incurred higher-than-anticipated supply-chain costs of more than $400 million in the U.S. segment in the fourth quarter of fiscal 2022. WMT is also encountering in-stock hurdles. Supply-chain headwinds are likely to persist in the near term, per the last earnings call.

On its fourth-quarter earnings call, management also stated that it expects some expense deleverage going forward as it anticipates increased supply-chain, wage and tech costs. The company envisions the operating income and earnings per share to decline in the low double digits to low teens in the first quarter as it cycles stimulus gains witnessed last year and higher wages this year.

Apart from this, divestitures might have hurt the company’s performance in the quarter under review. Walmart completed the divestiture of its businesses in Argentina, the United Kingdom and Japan in the first quarter of fiscal 2022. We note that Walmart’s overall revenues in the fourth quarter of fiscal 2022 were hurt to the tune of about $10.2 billion by divestitures related to the Walmart International business. The adjusted operating income was affected by divestitures by roughly 60 basis points.

On the positive side, Walmart has been gaining from its sturdy U.S. comp sales record, which, in turn, is driven by its constant expansion efforts and splendid e-commerce performance. Walmart has been undertaking several efforts to enhance merchandise assortments. Also, WMT has been focused on store remodeling to upgrade stores with advanced in-store and digital innovations. The company remodeled 140 U.S. stores in the fourth quarter. Walmart is also gaining from its compelling pricing strategy, which helps it draw customers.

Walmart’s e-commerce business and omnichannel penetration have been increasing, all the more amid pandemic-led social distancing. From the fiscal 2021 beginning to the fiscal 2022 end, the company’s digital sales as a percentage of sales increased from 6% to 13%. The company has been taking several e-commerce initiatives, including buyouts, alliances and improved delivery and payment systems. These are likely to have aided in the quarter under review.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Walmart this time. 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, which is not the case here.

Walmart currently has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

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:

Costco Wholesale COST currently has an Earnings ESP of +1.90% and a Zacks Rank of 2. The company is likely to register an increase in the top line when it reports third-quarter fiscal 2022 numbers. The consensus mark for Costco's quarterly earnings has moved up by a penny in the past seven days to $3.04 per share. The consensus estimate suggests 10.6% growth from the year-ago quarter’s reported number. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Costco's top line is expected to rise year over year. The Zacks Consensus Estimate for COST’s quarterly revenues is pegged at $51.8 billion, which suggests a rise of 14.3% from the figure reported in the prior-year quarter.

Ross Stores ROST currently has an Earnings ESP of +1.24% and a Zacks Rank of 2. The company is likely to register an increase in the top line when it reports first-quarter fiscal 2022 results. The consensus mark for Ross Stores’ quarterly revenues is pegged at $4.5 billion, which suggests a rise of 0.5% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for ROST’s earnings has been unchanged at 99 cents per share in the past 30 days. However, the consensus estimate indicates a 26.1% decline from the $1.34 reported in the year-ago quarter.

Designer Brands DBI currently has an Earnings ESP of +2.17% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports first-quarter fiscal 2022 earnings. The consensus mark for Designer Brands’ quarterly revenues is pegged at $806.7 million, which suggests 14.7% growth from the figure reported in the prior-year quarter.

The consensus mark for quarterly earnings has moved up by a penny in the past seven days to 23 cents per share. The consensus estimate for DBI suggests growth of 91.7% from the year-ago quarter.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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Walmart Inc. (WMT) : Free Stock Analysis Report

Costco Wholesale Corporation (COST) : Free Stock Analysis Report

Ross Stores, Inc. (ROST) : Free Stock Analysis Report

Designer Brands Inc. (DBI) : Free Stock Analysis Report

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