Walmart’s
recent earnings record has been close to unimpeachable. For the past six quarters, the company has met or surpassed Wall Street’s expectations. Analysts believe
Walmart
is poised for another beat when it reports earnings Tuesday morning.
But with investors champing at the bit for any indications on what the world’s largest retailer is forecasting for 2024, a strong quarter is likely to be overshadowed by the company’s guidance.
Wall Street predicts that Walmart will post adjusted earnings of $1.64 a share for its fiscal fourth quarter, according to FactSet estimates as of Feb. 16. Sales are projected to rise 4% to $170.9 billion in revenue for the period ended in January, reflecting Walmart’s solid holiday performance.
With inflation and interest rates still running high, many Americans have turned to value-focused retailers like Walmart in a bid to stretch their budgets further, which should help pad the quarter’s results.
But a strong report may not be enough to give the stock a boost following the results. Guidance will be more important—especially if management takes on a cautious tone when speaking about fiscal 2024.
Evercore ISI analyst Greg Melich expects Walmart to meet analysts’ estimates. But he wrote in a note to clients that the stock could fall in the mid-single digits in percentage terms after the results, ”due to what we believe is likely to be conservative guide/tone on the consumer.”
Investors will also likely scrutinize any commentary about inflation—which has proven to be a double-edged sword for retailers like Walmart. While higher prices have helped the company grow its top line, inflation has also weighed on consumers’ ability to spend on high-margin discretionary items.
During the company’s fiscal-third-quarter earnings report, CEO Doug McMillon sent investors in a tizzy after saying the U.S. may be approaching a deflationary environment. Deflation is when prices fall instead of rise, which can lead to slower revenue growth and pressure on margins. The company has since clarified that deflation isn’t its base case for the year ahead, but the market will still be on the lookout for any updates.
Walmart stock closed at a record high Friday, bringing its gains for 2024 so far to about 8%. The
S&P 500,
in comparison, has risen 5%.
In late January, the company declared a three-for-one stock split, effective later in February. The split is expected to make the company’s stock price less intimidating to new investors and employees.
Another opportunity to buy into the stock could come after Tuesday’s earnings report. In the past few quarters, Walmart shares have sold off immediately after earnings, chiefly because expectations have been so high. But those pullbacks were temporary, and many analysts recommend taking advantage of the dip.
”We believe the bull case is still in the early to middle innings and see the potential for continued outperformance over a 12-18 month horizon,” wrote Oppenheimer’s Rupesh Parikh.
Write to Sabrina Escobar at [email protected]
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