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Walmart (WMT) to Post Q1 Earnings: Here's All You Should Know

Zacks Equity Research

Walmart Inc. WMT is scheduled to release first-quarter fiscal 2020 results on May 16. The big-box retailer boasts a splendid earnings surprise record, beating the Zacks Consensus Estimate by average of 5.1% in the trailing four quarters. Walmart’s robust growth efforts have helped it put up the solid show. Notably, the company has long been committed toward enhancing its in-store experience and e-commerce strategies to counter Amazon’s AMZN rising dominance.

Let’s see if the world’s largest retailer is set to keep its momentum alive in the quarter to be reported.

Walmart Inc. Price and EPS Surprise

Walmart Inc. Price and EPS Surprise

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

What to Expect?

The Zacks Consensus Estimate for first-quarter earnings has remained stable in the past 30 days at $1.02, which indicates a decline of 10.5% from the year-ago quarter’s reported figure. Nonetheless, the consensus mark for revenues is $125.2 billion, implying a rise of 2.1% from the year-ago quarter’s reported figure.

Comps Likely to Remain Strong

Walmart is likely to maintain its sturdy comparable store sales (comps) record in the to-be reported quarter, courtesy of constant e-commerce and store enhancement efforts. Incidentally, the company has been undertaking endeavors to enhance merchandise assortments. Also, it is on track with remodeling initiatives to upgrade stores with advanced in-store and digital amenities. Further, Walmart’s focus on buyouts, alliances, and improved delivery and payment systems are likely to have positive impacts on e-commerce sales. Evidently, the company’s strategic partnership with Microsoft MSFT; buyouts of ShoeBuy, Moosejaw, Bonobos, ModCloth and Jet.com; and deal with Lord and Taylor, among others, underscore its intention to build an impressive digital brand portfolio. The company’s plans to venture into the subscription-based video streaming arena, improve website and enhance check-out process highlight its initiatives to accelerate online business.

Apart from this, Walmart’s aggressive efforts to expand in the booming online grocery space are likely to bolster e-commerce sales in the first quarter. The company’s contract with Point Pickup, Skipcart, AxleHire and Roadie; deal with Postmates, and buyout of Parcel highlight its focus on enhancing grocery sales. Further, its Walmart Pickup program enables customers to place orders online and pick them up at a store for free. Walmart also partnered with ride hailing services, Uber UBER and Lyft, for speedy online grocery deliveries, and tested same-day delivery with Deliv. We believe that these actions will help Walmart offer multiple choices to online grocery shoppers amid increasing competition from Amazon. Together, these omnichannel strategies are likely to help the company maintain its spectacular U.S. comps trend in the quarter to be reported, thereby benefiting the top line.

Markedly, the Zacks Consensus Estimate for U.S. comps (excluding fuel) growth is pegged at 3.2% for the first quarter, suggesting a rise from 2.1% recorded in the same period last year. The consensus mark for Walmart U.S. sales stands at $80,195 million, calling for 3.1% growth from the figure reported in the year-ago period. The company’s top line is also expected to gain from favorable international sales. The company has been committed toward improving international performance, by shifting focus on areas with higher growth potential. In this regard, Walmart’s buyout of major stake in Flipkart is likely to be a driver. The Zacks Consensus Estimate for its International sales is pegged at $30,384 million for the impending quarter, indicating a rise from $30,260 million recorded in the year-ago period.

Factors Raising Concerns

While Flipkart’s inclusion is likely to boost the top line, costs associated with the investment are expected to show on Walmart’s operating income and bottom line in fiscal 2020, posing concerns for the quarter to be reported as well. Also, other costs associated with investments in e-commerce expansion and technological advancements, the mix impact from growing e-commerce operations and the company’s compelling pricing strategy are major threats to margins and profits.

What the Zacks Model Unveils

Our proven model doesn’t show a beat for Walmart this earnings season. For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Walmart carries a Zacks Rank #3, its Earnings ESP of +0.00% makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

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