Walmart’s (WMT) third quarter results on Thursday will shed light on consumer resilience ahead of the crucial holiday, with investors keeping an eye on the retailer’s margins.
Wall Street expects the big-box retailer to post EPS of $0.60, implying a rise of 3.4%, while revenue is expected to rise over 3% at $175.17 billion during the quarter.
Earlier in the day, Target (TGT) posted a bigger-than-expected drop in comparable sales, while investors eyed the retailer’s guidance for the crucial holiday quarter.
Despite economic headwinds and weakening consumer sentiment, Walmart coped well as upper-income households flocked to its stores and contributed to sales. Along with stability of Walmart’s core grocery business, its diversified model with a robust e-commerce growth helped the company.
The company, in August, Walmart’s comparable sales also topped expectations, but its margins figure disappointed investors. Over the last two years, Walmart has beaten EPS estimates 88% of the time and has beaten revenue estimates 100% of the time.
Last week, Arkansas-based Walmart announcement that CEO Doug McMillon will retire next year after more than a decade at the helm, with veteran John Furner taking over, was applauded by Wall Street analysts.
“Although Y/Y compares get slightly more challenging in Q3, we expect the momentum last quarter in key areas such as e-commerce and Walmart Connect to have a positive, flywheel effect on sales in the quarter,” said Piper Sandler analyst Peter Keith. The brokerage said it anticipates Q3 gross margin will be inline with consensus of +24.5% (+30bps y/y).
Seeking Alpha analysts and Seeking Alpha’s Quant ratings are cautious and rated the stock a Hold. In contrast, Wall Street analysts consider it a Strong Buy.
A recent Seeking Alpha analysis by YR Research said this quarter, Walmart will have to prove that it is overcoming competitive pressure from companies such as Amazon, Uber and DoorDash, when it comes to online business, while also returning to margin expansion and accelerated growth.
“Anything less than that, in my mind, will fail to meet expectations,” it added.
Over the last three months, EPS estimates have seen 22 upward revisions, compared to four downward revisions. Revenue estimates have been revised upwards 13 times versus two downward moves.
The stock has gained over 12% so far this year, underperforming the near 13% rise in the broader S&P 500 Index.