Walmart Beats Earnings Views, Sticks To Guidance After Big Warnings

Walmart (WMT) beat lowered earnings and sales views Tuesday, with the Dow Jones retail giant reaffirming guidance for the second half of the year after slashing guidance twice in the prior three months. WMT stock rose solidly before the open. Target (TGT), which reports early Wednesday, also climbed.



Walmart Earnings

Estimates: Analysts Predicted Walmart earnings to drop 9% to $1.62 per share. Analysts’ revenue target is $150.9 billion, up 7%.

Results: Walmart earned $1.77 per share vs. $1.78 a year earlier. Revenue grew 8.4% to $152.9 billion. Much of that sales gain reflects higher prices, which are a response to rising costs.

Walmart reported weak fiscal Q1 results and guidance on May 17, then followed up with another warning on July 26.

The retail giant found itself with unwanted big-ticket items like TVs, as inflation-hit shoppers shifted to cheaper staples vs. discretionary goods spending.

On Tuesday, Walmart signaled it’s getting a handle on its inventory.

“The actions we’ve taken to improve Inventory levels in the US, along with a heavier mix of sales in grocery put pressure on profit margins for Q2 and our Outlook for the year,” CEO Doug McMillon said in a statement. “We made good progress throughout the quarter operationally to improve costs in our supply chain and that work is ongoing.”

Outlook: The Dow Jones retail giant still expects Walmart US same-store sales to rise 3% excluding fuel in the second half of the year, or 4% for the full year. Based on current exchange rates, the company said it predicts a headwind of about $2.1 billion in the second half of 2022.

Walmart sees full-year adjusted EPS down 9%-11%. On July 25, the discount giant slashed estimates, predicting EPS would fall 11%-13%. Analysts have projected full-year earnings of $5.69 per share, down 11.9%.

For Q3, Walmart expects net sales growth of about 5% along with a 9%-11% decline in adjusted EPS.

Is Walmart A Buy Or A Sell Right Now?

Walmart stock rose 4% before the open in Tuesday’s market trading. Shares are above their 50-day line and are working towards their 200-day average, according to MarketSmith analysis.

The stock has a 48 Composite Rating out of 99. It has a 33 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share price movement with a 1 to 99 score. The rating shows how a stock’s performance over the last 52 weeks holds up against all the other stocks in IBD’s database. The stock’s EPS rating is 69.

Target Earnings

Estimates: Wall Street forecasts Target will earn 79 cents per share on $26 billion in sales.

Results: Check Wednesday before the market opens.

In early June, Target downgraded its second-quarter guidance. The Minneapolis-based company slashed its Q2 operating margin forecast to 2%, down from 5.3%.

The company also announced it is planning price increases to address “unusually high transportation and fuel costs.” In addition, Target also reported its intent to cull excess inventory and cancel orders before the end of the second quarter.

“While these decisions will result in additional costs in the second quarter, we’re confident this rapid response will pay off for our business and our shareholders over time, resulting in improved profitability in the second half of the year and beyond,” CEO Brian Cornell said at the time.

Target made the decisions after it missed earnings estimates, guided lower on profit and reported large stockpiles of unsold goods in the first quarter. Those results sent Target stock to its lowest level since September 2020.

Target stock climbed 3% early Tuesday. TGT stock has scaled back above 10-week support, but is still some distance from a declining 50-day line.

More Retail Earnings

Walmart and Target earnings are part of a big week for retail stocks. Others due to report during the week include off-price specialists TJX (TJX) and Ross Stores (ROST).

Walmart’s Dow Jones peer Home Depot (HD) topped Q2 views early Tuesday, with Rival home improvement chain Lowe’s (LOW) is tap Wednesday.

The annual rate of inflation in July dropped to 8.5%, down from 9.1% in June. The deceleration owed largely to decreasing gas prices, but federal data shows the prices of food and other goods are still on the rise.

Best Buy (BBY), Dollar Tree (DLTR) and Dollar General (DG) were among the other retail stocks that dropped on Walmart’s late July warning.

Target sits third, behind Walmart and Costco (COST), in the Retail-Major Discount Chains industry group. The stock has a Composite Rating of 48. Its Relative Strength Rating is 13 and its EPS Rating is 82.

Please follow Kit Norton on Twitter @KitNorton for more coverage.


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