Here's How Walmart (WMT) Is Positioned Ahead Of Q4 Earnings

Walmart Inc. (NYSE:WMT) is slated to release fourth-quarter fiscal 2020 results on Feb 18. This supermarket giant delivered a positive earnings surprise of 6.4% in the last reported quarter. Also, its earnings outperformed the Zacks Consensus Estimate by 6.8%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fourth-quarter earnings has been stable over the past 30 days at $1.44 per share. This suggests an increase of 2.1% from the year-ago period’s reported figure. The consensus mark for revenues is nearly $142.5 billion, indicating a rise of 2.7% from the figure reported in the year-ago quarter.

The Zacks Consensus Estimate for fiscal 2020 earnings per share stands at $4.98, suggesting a rise of 1.4% from the year-ago period. The consensus mark for revenues stands at $525.5 billion.

Key Factors to Note

Walmart has been benefiting from its robust comparable store sales (comps) trend. The company’s U.S. comps have been rising year over year for 21 straight quarters. Its International segment has also been performing well, especially thanks to Walmex. The company has been committed toward achieving growth across all its markets on the back of fresh products, and the expansion of online grocery and private brands.

Walmart has been gaining from its store enhancement and e-commerce growth endeavors in the face of rising competition from the online giant, Amazon (NASDAQ:AMZN) . In this regard, the company is focusing on enhancing merchandise assortments along with store expansions and remodeling to upgrade them with digital and other advanced innovation. On the e-commerce front, Walmart has been gaining from buyouts and alliances. The company’s 77% stake in Flipkart has been aiding the top line, though costs associated with the same have been weighing on its operating income and bottom line. Some other noteworthy acquisitions like ShoeBuy, Moosejaw, Bonobos, ModCloth and Jet.com have been aiding Walmart as well.

Notably, the company’s focus on boosting online grocery shopping by offering easy shopping methods and seamless grocery deliveries has been driving e-commerce sales to a large extent. To this end, the deal with Postmates, the buyout of Parcel and alliance with Point Pickup, Skipcart, AxleHire and Roadie bode well. Management expects U.S. e-commerce sales growth of 35% in fiscal 2020. Apart from these, Walmart’s comps have been gaining from a compelling pricing strategy, which however has been weighing on margins. Additionally, the company’s margins have been under pressure due to costs associated with e-commerce investments and technological advancements, and the growing e-commerce mix.

Nonetheless, Walmart envisions a slight year-over-year increase in fiscal 2020 earnings per share (including Flipkart) and a high-single-digit rise (excluding Flipkart).

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Walmart this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Walmart has a Zacks Rank #3 and an Earnings ESP of +0.31%.

Other Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Costco Wholesale Corporation (NASDAQ:COST) has an Earnings ESP of +0.64% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar Tree (NASDAQ:DLTR) has an Earnings ESP of +1.00% and a Zacks Rank #3.

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