Q3 Earnings Preview for Walmart (WMT)

in EARNINGS/INVESTING IDEAS by

In September, Walmart launched Delivery Unlimited, for what was supposed to be Walmart management’s answer to Amazon Prime and Amazon Fresh. At the time of this writing, an annual membership to Delivery Unlimited costs $98, and monthly membership costs $12.95 for unlimited grocery delivery. Analysts expect the membership cost to change since Amazon has already responded in a big way.

Not taking the added competition lightly, Amazon axed the $14.99 Amazon Fresh fee for Amazon Prime members. The grocery business is key to Walmart’s e-commerce strategy and since Amazon Fresh is already offered in areas that cover around 35% of the U.S. population, management will have to respond quickly.

Walmart Inc. (NYSE:WMT) is scheduled to report Q3 earnings results on November 14, 2019 before markets open for trading. The company is expected to report earnings of $1.09/share on revenue of $127.8 billion. The consensus earnings per share (EPS) of $1.09/share is based on a poll of 26 analysts and represents a growth of 0.9% over the same quarter last year when the company reported earnings of $1.08/share.

The revenue forecast of $127.8 billion based on a poll of 14 analysts implies a year-over-year (YoY) growth of 3.1%. Last year the company reported $123.9 billion in revenue for the quarter.

Expected to report EPS growth of $0.01/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $127,767.55 $123,897.00 3.1%
EPS $1.09 $1.08 0.9%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarters. What are your expectations from Walmart for this earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.22 $1.27 4.1% Beat
Q1, 2020 $1.02 $1.13 10.8% Beat
Q4, 2019 $1.34 $1.41 5.2% Beat
Q3, 2019 $1.01 $1.08 6.9% Beat
Q2, 2019 $1.22 $1.29 5.7% Beat
Q1, 2019 $1.13 $1.14 1.3% Beat
Q4, 2018 $1.37 $1.33 -2.9% Missed
Q3, 2018 $0.97 $1 2.9% Beat

One question we always consider here at the Bankers’ Tribune is how important are earnings reports to Walmart’s stock price performance? It’s more important for some companies than for others. In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-15 $106.20 $112.99 6.4% Increase
2019-05-16 $99.88 $100.86 1.0% Increase
2019-02-19 $99.99 $99.88 -0.1% Decline
2018-11-15 $101.53 $97.69 -3.8% Decline

After the last earnings report for the period ending July 31, 2019, the stock price reacted by increasing by 6.4%.

Fundamentals And Technical Analysis

Walmart is currently trading at $120.98/share, up 1.6% for the day. The company is trading at approximately 100.2% of its 52 week high of $120.71/share. The company’s stock price is up 13.9% since the last earnings report and down -0.3% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 52.12 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 25.6x and a forward P/E multiple of 24.1x.

Walmart’s current share price also implies a price-to-book (P/B) multiple of 4.8x. The following table summarizes some other key fundamental ratios:

Data as of November 13, 2019
Metric Value
Last Fiscal Period FY2020.Q2
Period End Date July 31, 2019
Stock Price (Current) $120.98
P/E Ratio 25.6x
P/E Ratio (Fwd) 24.1x
PEG Ratio 9.5
Total Debt to Capital (%) 17.9%
Levered Free Cash Flow $16.910 billion
Enterprise Value / EBITDA 12.7x

Company Profile: Walmart Inc.

Walmart Inc. is a large-cap stock with a market capitalization of $338.8 billion and a total enterprise value of $411.7 billion. The company operates in the Consumer Staples sector and Food & Staples Retailing industry.

Walmart Inc. engages in the retail and wholesale operations in various formats worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam’s Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, discount stores, drugstores, and convenience stores; membership-only warehouse clubs; e-commerce Websites, such as walmart.com, jet.com, shoes.com, and samsclub.com; and mobile commerce applications.

The company offers grocery products, including meat, produce, natural and organics, deli and bakery, dairy, frozen foods, alcoholic and nonalcoholic beverages, floral and dry grocery, as well as consumables, such as health and beauty aids, baby products, household chemicals, paper goods, and pet supplies; and health and wellness products. It also provides electronics, cameras and supplies, photo processing services, wireless, movies, music, video games, and books; stationery, automotive, hardware and paint, sporting goods, and outdoor living and horticulture; apparel for women, girls, men, boys, and infants, as well as shoes, jewelry, and accessories; and home furnishings, housewares and small appliances, bedding, home decor, toys, fabrics, crafts, and seasonal merchandise, as well as brand name merchandise. In addition, the company offers fuel and financial services and related products, including money orders, prepaid cards, wire and money transfers, check cashing, and bill payment.

It operates approximately 11,300 stores and various e-commerce Websites under the 58 banners in 27 countries. The company was formerly known as Wal-Mart Stores, Inc. and changed its name to Walmart Inc. in February 2018. Walmart Inc. was founded in 1945 and is based in Bentonville, Arkansas.

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