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Walmart Earnings Preview: Sales Gains Continue Amid Inflationary Pressures

By Investing.com (Haris Anwar/Investing.com)Stock MarketsMay 16, 2022 16:42
au.investing.com/analysis/walmart-earnings-preview-sales-gains-continue-amid-inflationary-pressures-200507967
Walmart Earnings Preview: Sales Gains Continue Amid Inflationary Pressures
By Investing.com (Haris Anwar/Investing.com)   |  May 16, 2022 16:42
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  • Reports FY Q1 2023 results on Tuesday, May 17, before the open
  • Revenue expectation: $138.83 billion
  • EPS expectation: $1.47
  • If you’re interested in upgrading your search for new investing ideas, check out InvestingPro+

Investors have several reasons to feel optimistic about Walmart's (NYSE:WMT) latest quarterly earnings, scheduled to be released tomorrow.

The mega retailer is on track to post a 26th consecutive quarter of positive traffic at its stores as the company successfully handles cost pressures and lingering supply-chain disruptions. WMT closed at $148.05 on Friday.

WMT Weekly TTM
WMT Weekly TTM

Sales this year will climb about 4%, the Bentonville, Arkansas-based retailer said in February, adding that operating income would grow faster than revenue.

This strong outlook comes in an environment when retailers are navigating multiple challenges posed by global supply-chain disruptions, a labor squeeze, and rising fuel costs—all of which are contributing to the fastest jump in consumer prices in four decades.

These pressures, however, provide Walmart a competitive edge to attract more cost-conscious customers. According to chief executive Doug McMillon, Walmart is in a strong position to win over more consumers, helped by its omnichannel focus which is pushing digital penetration to record levels. He told Bloomberg in an interview that fighting inflation is in the company’s DNA.

If all goes as anticipated, Walmart should post its 26th successive quarter of positive traffic at its US stores when it reports its fiscal 2023 first-quarter earnings.

The company is also on the right track to counter online retailers like Amazon.com (NASDAQ:AMZN), by successfully executing its own e-commerce strategy.

Online sales, which are becoming a more significant contributor to reported same-store sales growth, have expanded 87% during the past two years.

Analysts Are Bullish

Wall Street Journal reported in February that Walmart was focusing on faster delivery and increasing the volume of products listed by third-party sellers. For an online retailer such as Amazon or Walmart, sales by third parties that list products on its website are typically more profitable than its direct sales.

Walmart is aiming to have 200 million products listed on Walmart.com by the end of the year, up from 170 million currently.

The success in WMT’s business strategy is also reflected in its share price which has outperformed the benchmark S&P 500 during the past three months, especially at a time when the market is experiencing a corrective phase. Its shares rose more than 10% in the last quarter.

Analysts at Cowen reiterated Walmart as an outperform in a recent note, saying that they are bullish on the stock as grocery trends “appear robust.”

“Our surveys suggest strong grocery momentum at WMT which could yield upside to comps as Cowen models +2.5% vs. Street’s +1.8%.”

In a poll of 38 analysts conducted by Investing.com, 29 gave the stock a "buy" rating with a consensus 12-month average price target of $164.26, implying a 10.95% upside potential from the current market price.

WMT Consensus Estimates
WMT Consensus Estimates

Source: Investing.com


Bottom Line

Walmart should report another strong earnings backed by robust consumer demand and the company’s successful strategy to combat supply-side disruptions.

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Walmart Earnings Preview: Sales Gains Continue Amid Inflationary Pressures
 

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Walmart Earnings Preview: Sales Gains Continue Amid Inflationary Pressures

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